Hi, I have changed by company 6 months back. My previous company recovered Rs. 2lacs from my full & final settlement as notice period buyout. Full & final settlement was comprising my gratuity amount & salary of 2 months. They paid me the balance amount (FNF amount - 2L) as settlement. I have received the Form 16 from this company but no where the recovery amount has been mentioned. My current organization paid me 2L as notice period buyout & they have included this entry in Form 16 which is subject to tax. How do I consider the 2L amount out of tax assessment as I have not earned that amount & on the contrary have paid back my previous company while exiting. If this is not considered then I am getting a significantly high tax liability. Also, I have read the latest order by ITAT (Ahmedabad bench) dated 18th April 2017 about no tax on notice period pay cut. How does this help in my situation? (http://economictimes.indiatimes.com/wealth/no-income-tax-on-salary-deducted-for-not-serving-notice-period/articleshow/58292312.cms) I would be extremely helpful if anybody can help me on priority on the above mentioned concern.
Hi,
As per income tax regulation, you have to include this buy out in your income. I know its unfortunate but that is how it is.
The case which you are referring is on different facts. In that case, previous employer has deducted the buy out amount from the salary but included it in Form 26 AS.
In you case, new employer has included this in From 26 AS which is lawfully correct.
Hi Abhishek, Thanks for your reply. But I would like to understand that my previous company paid me Rs. 8L salary for the serving tenure & have filed TDS accordingly. However while exiting I have repayed them Rs. 2L. Shouldn't this amount be accounted somewhere? Technically, salary paid by my previous company becomes Rs. 6L as I have returned them Rs. 2L. I do have buyback confirmation document received from the previous company which states the following: "As per the employment terms with our company, you were to serve three months' notice period, of which you have served 30 days. Hence we have recovered Rs. 2,00,000/- from the Full & final settlement towards the balance notice period." Kindly assist me in understanding the above. I also agree that my new employer has correctly included the payback in Form 26AS which is subject to tax & I don't have any apprehensions on that.
Hello,
You will have to inform your previous employer to rectify his TDS returns in order to avoid all this hassle of paying excess tax on income which you have not even received.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
Please note that your previous company has to submit what you have earned. Once you earned that salary it's your income. Whether you pay it back to your employer by way of notice payout it does not matter.
Hi,
Your previous employer has to rectify his TDS return and issue you a revised Form 16.
However, in case he does not, then you can reduce your taxable income to that extent. But it is likely that the matter will be resolved only through litigation.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Hi Keerthiga, Thank you for your much required assistance. Please note that my previous company has agreed to revise the Form 16 considering the changes. But they informed that it would take a week to generate the revised Form 16 & submit to Income Tax Dept. They suggested to file the ITR once the revision is done. In such case I would miss the deadline of ITR filing i.e. 31st July. Is there a way to file taxes after the 31st July without incurring any penalty for late submission. Is there a way to get an extension on submission date. Whom do I need to contact to inform that I am waiting for a revision on Form 16 & would be able to file ITR only after that. I would be eager to hear from you. Thank you once again for the prospective explanation provided.