Notice pay buying

This query is : Resolved

indira (Querist)
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13 March 2009 Dear all,

We have paid one of our employees an amount equal to his notice pay. His previous employer has not shown this payment in form 16. If we show this money as his income then his tax liability will be more. How should we treat the money paid to him? Is it an expense for the company?

K V Subba Rao

K V Subba Rao (Expert)
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14 March 2009 (1) Your Company having paid Notice Pay amount should include in Form 16 issued by your Company.

Notice Pay is NOT deductible. Pl.check the following link:

http://www.taxworry.com/2007/04/notice-pay-to-employer-is-not.html

(2) For your Company, it is an expense item

indira

indira (Querist)
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14 March 2009 Dear sir,

Does this mean we treat it as remuneration paid to the employee? If his previous employer does not show in the form 16 given by him and we show it as remuneration in the form 16 given by us, he is paying taxes heavily.

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K V Subba Rao

K V Subba Rao (Expert)
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14 March 2009 We can't help it.

Present Employer who pays Notice Pay amount to Employee has to treat it as remuneration or salary paid by him and Present Employer can only include it in Form 16.

Employee cannot claim any Deduction for Notice Pay amount paid by him to his previous Employer

Payment of Notice Pay is treated as "application" of salary, that is, spending from out of salary earned.

Search google and you find dozens of Articles on Notice Pay subject in web sites

O.D.SHARMA

O.D.SHARMA (Expert)
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14 March 2009 Dear,
Pl.see in case of notice pay generally companies deduct from sattlement & tax liability is less.other way around the 2nd Company have paid to employee is again salary/Remuneration of employee.practically its employee whose salary is deducted & paid.How your case is where u are paying to company? Adjustment at the employee level is no issue.