19 April 2012
A, an employee has left a company without giving adequate notice period hence company recovered notice pay from him.While doing full & final settlement, the amount of notice pay recovered from the employee was reduced from the total income to arrive at final tax liability. Is this treatment correct from the tax point of view? If not what is the correct treatment for such item?
19 April 2012
Yes. The deduction of TDS is appropriate. TDS is to be deducted only on salary paid to the employee. It is in agreement with the employee that if he does not serve notice pay, he will not be getting that many days of salary.
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