Taxability of notice period pay
This query is : Resolved
18 July 2017
An employee leaves a company by paying 2 months notice pay. He is paid his salary for the last month net of notice pay period i.e. salary minus notice pay period. Whether this net amount is taxable in his hand or gross salary is taxable ? If gross salary is taxable, whether he is entitled for deduction of such notice pay from his gross salary in his return of income ?
18 July 2017
No, Notice Pay is not deductible from Gross Salary while filing your tax return. If your prospective employer has agreed to compensate you on this account, you can ask your prospective employer to pay this money directly to your previous employer, otherwise you will end up paying tax on the same twice. Because it will not be deductible by previous employer and next employer will tax it as a perquisite. Hope it clarifies.
19 July 2017
No suppose prospective employer is not giving notice period salary, whether the same is deductible from salary by previous employer ? If not, whether the employee can claim deduction in his return of income or not ?
28 July 2017
Dear Praveen, No it is not deductible from tax purposes. This essentially mean that you have to pay tax on this twice. Law is like this only. There is no provision under income tax act which allows deduction from salary income. Only specifically mentioned allowances are deductibles. Hope it is clear.
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