No tax on salary deducted if notice period not served

I-T Act says salary income is taxable on a due basis irrespective of whether it was paid or not.

If you have not served during the notice period and your employer has deducted salary for the same, then you don’t need to worry about paying tax on the deducted salary.

In its recent ruling, the Income Tax Appellate Tribunal (ITAT) that takes up disputes related to income tax issues has clarified that an employee was not required to pay tax on salary deducted by employer for not serving notice period, according to a report in The Times of India.

The report cited two companies that at the time of full and final settlement had deducted salary for the month during which employees did not serve the notice period.

“Under the income tax act, salary income is taxable on a due basis, regardless of whether it has been actually paid to an employee or not,” the report said. After an employee puts in their papers and fails to serve contractual notice period, the employer cuts salary for the said month.

Likewise, tax authorities do not calculate such salaries for assessment of income tax. “The ITAT has recognized the concept of real income, which is well accepted under I-T laws,”

By : The asian age / Apr 21, 2017