Tds on salary notice pay

This query is : Resolved

Ashok Kumar Bansal (Querist)
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05 November 2011 One employee resigned from X co. and paid notice pay of Rs. 1.00 lac and this amount was reimbursed to him by company Y after joining. Now, Y is going to deduct TDS on this amount but X is refusing to deduct this amount while calculating the total salary income for TDS purpose.

Whether action of X is right ? Do we have any case law ? Is there any other way to avoid this double taxation?

Yash Anandkumar Mandavia

Yash Anandkumar Mandavia (Expert)
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05 November 2011 The action pretended to be taken by Mr. X, in my humble opinion is not correct. The reason is simple. As per interpretation of Act, any amount received in lieu of salary is taxable. Eventhough you interpret the section 192, you will find that the amount received by Mr. X is liable for TDS.

This is a complicated issue which many shuffling employees are facing nowadays. I am afraid that there is no way to prevent double taxation.

Eventhough if you plan that Co. Y can directly pay to Co. X, than also it will taxable to employee if the nexus is proved by the ITO.