Taxability of joining bonus and some allowances refund back

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 May 2016 I switched jobs in dec'14 and my previous employer took back the joining bonus, handset allowance, relocation allowance etc given to me in jun'14 But this reversal has not been reflected in my taxable income. So I am ending up paying tax on the amount that company has taken back too. How can I claim tax deduction on this amount?

Abhishek Ranjan Singh

Abhishek Ranjan Singh (Expert)
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27 May 2016 n my opinion, only the net salary—remaining after the deduction of notice pay—would be taxable in the hands of the employee. Had it been the other way around i.e. the employee had been fired instead of resigning on his own, the employer would have paid him a month's (or whatever the period of notice) salary. That amount would've been taxable in his hands, wouldn't it? Now that the employee has foregone a month's salary for leaving all of a sudden, shouldn't he be entitled to have that amount knocked off his gross salary? But there's no scope of any deduction from salary---the list of items that can be deducted out of salary as mentioned in Section 16 is exhaustive, the purists might argue. My contention is: the employee was made to forego that salary as part of the terms of employment he had with the employer. I don't think it's an application of income, like say a manager working in a charitable organization foregoing his salary. The manager would still be liable to get taxed on that amount because he's done it voluntarily. But the salaried guy who decides to say goodbye to his employer after finding greener pastures elsewhere isn't foregoing his pay voluntarily—the terms of the employment leave him no choice but to part with a certain period's salary. He gets taxed for the salary he gets in pursuance of the terms of the employment. So how can we tax him for the salary he has had to give up in pursuance of the terms of employment?We do have a case law on this.

Take a certified Tax professional service to file the Income tax return.

Abhishek Ranjan Singh
ARS Solutions
www.arssolutions.co.in
+919022838615

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