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Notice period pay cut

PRIYANKA (Account and Audit Assistant) (65 Points)

18 July 2017

IF THE EMPLOYEE HAS PAID EMPLOYEE PAID MONEY TO THE EMPLOYER FOR NOT SERVING THE NOTICE PERIOD THEN HOW TO TREAT IT WHILE CALCULATING TAX

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7 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (185664 Points)
Replied 18 July 2017

Deduction not allowed......... capital loss......

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neeraj gupta (1138 Points)
Replied 18 July 2017

Dear Priyanka and Dhirajlal Sir, it seems there has been recent rulings in this regard which have tilted this in favour of the assessee.

https://timesofindia.indiatimes.com/city/mumbai/notice-pay-cut-by-employer-cannot-be-taxed-tribunal/articleshow/58288010.cms

https://www.financialexpress.com/money/now-you-dont-need-to-pay-income-tax-on-notice-period-pay-cut/644193/

PRIYANKA (Account and Audit Assistant) (65 Points)
Replied 19 July 2017

SIR PLEASE CONFIRM ME THE SAME BECAUSE I HAD TO FILE RETURN

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (185664 Points)
Replied 19 July 2017

@ Neeraj Guptaji........ thanks for the reference.....

@ Priyanka: Here you have mentioned that the employee has paid to employer some amount for not serving the notice period..............

So, as per above........ no deduction allowed........

neeraj gupta (1138 Points)
Replied 20 July 2017

You are welcome Sir.

Priyanka, please go through the provided links and make best use of these to your advantage.

Here is the excerpt:

"The Commissioner (Appeals) pointed out that under section 15 of the I-T Act, tax is triggered when the salary becomes due, irrespective of whether it is paid or not. Secondly, section 16 of the Act does not provide for any deduction made by the employer for the notice period. Thus, the deduction of Rs. 2.76 lakh claimed by Rebello was not upheld. This led to Rebello filing an appeal before the ITAT, which decided in his favour."

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PRIYANKA (Account and Audit Assistant) (65 Points)
Replied 20 July 2017

In the case the ITAT has recognised the concept of real income so in my case also the amount which my client received is not his real income because after that she had to pay the amount to the company. so his real income should be the salary after deducting the amount paid by her.

Please give your valuable opinion

neeraj gupta (1138 Points)
Replied 20 July 2017

Yes that is the inference I will make from this. The title of the article says it: "now-you-dont-need-to-pay-income-tax-on-notice-period-pay-cut". I will suggest you getting hold of the judgement if feasible, build your case after verifying that the conditions applicable to your client are similar or not, and share your views on the particular case.