Dear Sir/Madam,
The query is with regard to salaried employees who resigned and joined in a new organsiation. As per the current scenario there is a concept of loss of pay to the employee if he did not serve the notice period(obligation as per the contract). As per Income Tax Act there is no provision regarding the deduction from salary for this type of expenditure(loss of pay). The query in this is, the previous employer who is collecting the amount(loss of pay) will recognise this as income and the same amount is not deductible from the salary of employee which leads to double taxation. Kindly let me know whether any provison in the act to claim this amount as deduction.
Regards,
Kiran
The One Says:
This is interesting. Excellent question :)
If I understand correctly what you are saying is that the employee is paid Salary (which is taxed ie TDS deducted) and from this taxed amount he pays a [b]penalty[/b] which when the employer recognised as income is taxed again.
However, this penalty for not complying with 'Notice Period Obligation' cannot be reasonably construed as an amount originating from income that is already taxed.
Even if this is the case (above), under the income tax act [b]Income[/b] is taxed whether it was previously taxed in the hands of another is not generally taken into consideration.
Further only amounts paid out of salary can be deducted therefrom for which provisions exist.
[b]In my opinion this is not a case of Double Taxation[/b]. Well I could be completely wrong also ?!!
Other opinions are welcome.
CAclubindia
