Hi Pankaj,
I worked for an organization for 18 months and while leaving, i had to pay an amount of Rs.60,000.00 (approx) towards breach of service agreement i had with that employer. The same was deducted from my Full and Final Settlement amount and was clearly shown as deduction in the FnF statement. Can i show this amount as deduction from my Gross salary while calculating the tax liability? Should the employer show this amount in the Form-16 issue by him?
Thanks, Mahesh
Notice period deduction amount won't be shown in Form-16. Its an expense and deduction is not available for it. Its a penalty imposed by the employer for not serving notice period. In Income tax no exemption or deduction is allowed for penalty.
Hi Pankaj, thanks for you reply. I would like to inform you that, the amount deducted is not towards shortfall in the notice period. I have served the entire notice period. This deduction is towards, breach of service agreement, i signed before travelling abroad for Knowledge Transfer, promising that i will stick on to the organization for 2 year post completion of the training / returning.
Can you please clarify on this please.
thanks, Mahesh
In this case too, same rule will apply as its an expense/penalty.
