Amount paid in lieu of Notice period

This query is : Resolved

chetan soni (Querist)
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18 March 2008 one of my employee has paid salary to her previous employer on account short notice period. The amount paid is significant. Her earlier employer has not mentioned that in her form 16
My query is :

Shall i considered that amount in his tax calculation?
If yes then under which section.

CA. Amit Daga

CA. Amit Daga (Expert)
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18 March 2008 Sonijee Sastriyakal

Sirjee salary is always taxable on the receivable basis not on the accrual basis..

In case of tax computation you just need to consolidate form 16 figures and tell to your employee that he will be talk to his prev employer regarding this.

Becuase it will be taxable in the salary column only

Thanks
Amit

chetan soni

chetan soni (Querist)
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18 March 2008 i had already taken that step, but want to know whether that is deductiable from salary income or not.

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CA. Amit Daga

CA. Amit Daga (Expert)
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18 March 2008 why its deducted it should be included in the salary income

chetan soni

chetan soni (Querist)
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18 March 2008 Plz check this link http://www.itatonline.org/articles2/notice_pay_salary_arrears.php

It is saying that at the time of TDS deduction add this to total income, then at the time of income tax returns fillings deduct it from salary income & take refund from income tax department.

Just want to confirmed that.

CA. Amit Daga

CA. Amit Daga (Expert)
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19 March 2008 Yar TDS deduction you have to add in the income and when you come to know abt your final tax amount accordinging you adjust it
Ex:-Let suppose your TDS is RS.25000
1.Final Tax Liability is 20000
2.Final Tax Liability is 25000
3.Final Tax Liability is 30000

In the first scenerio you will be claim for refund of Rs.5000.Because your actual liability is less than your TDS amount.

In the Second Scenerio your tds and your tax liability is same.So no need to do any thing.Simply file the return

In the last Scenerio you have to pay further RS.5000 as a tax because your liability is more than your TDS amount.

For knowing actual amount of tax liability we have to add TDS amount.Otherwise you are unable to know your actual tax liability as well as you will not pay actual tax liability.

For example as i said Let your TDS is Rs.25000
Assume your Taxable salary is during the year is Rs.325000 and after deduction TDS its Rs.30000 .If you will be calculated Tax Without Adding TDS your liability will be 29000 and if you add your TDS amount your liability will be 36500.

Thatswhy you have to add TDS amount at the time of computation and at the time of filling acc to situation you have to take a reasonal steps

I think i am able to clear your confusion