Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether Reimbursement Of Notice Pay Is Taxable In The Hands of Employer?

QUERY: Is the notice pay compensation taxable in the hands of employer? If yes, it would amount to double taxation i.e. once when salary was paid by the employer who had deducted the tax at source under section 192 of the Act, and again when he receives a notice pay compensation from employee?
ANSWER: Generally, a notice pay compensation is deducted by the employer before releasing any amount of gratuity or any other sum, the employer deduct the tax at source under section 192 of the Act. Hence, there is no double taxation.

Even if it is assumed that no amount was payable to a particular employee, who pays the notice pay compensation to the employer. The employer would credit the said amount to salary account and net amount would be debited to profit and loss account. Thus, there is no double taxation.

Posted in Income-tax

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