Compensation paid by employee

This query is : Resolved

Sachin Jain (Querist)
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18 July 2008 Hi, What is the tax treatment in the hand of employee and employer if cause of breach of contact, employee is required to pay some amount to employer.

For example, if employer sends employee on a project and get the bond singed as per which, if employee left the organisation before sepecifed perioed, he/she will be resposible to pay fix amount to employer. In that case what will be the tax treatment of amount paid by emplyee to employer in the hand of employer and employee. Please advice.

Sambu Suresh

Sambu Suresh (Expert)
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18 July 2008 it is taxable in the hands of the employer u/s 41.

employee will not get any deductions from his income.

Sambu Suresh

Sambu Suresh (Expert)
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18 July 2008 even in case the employer is not paid some part of salary also, employee has to pay the tax on his income and should show in his tax return.

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