One of our clients who worked in ICICI Bank had resigned on 22.11.2008.he was required to serve a notice of 90 days before resignation.however he failed to serve the notice and was therefore required to pay a compensation of Rs.1,00,000.00 to the Bank.This compensation is not mentioned in his Form 16.My question is whether this compensation paid is deductible from his Salary income for the A.Y. 2009-10.
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Income from salary
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Salary income is chargeable to tax on due basis.
In your case, the employee has not either foregone or surrender the salary. Though the compensation paid is out of salary income, it is not escapable from taxation.
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