Income Tax on Reimbursment
Nisha
(Querist) 30 June 2011
This query is : Resolved
I have paid X amount to my old company to Buy-out 1 month Notice Period and got reimbursement for the same X amount from the new company.
Now the company has deducted TDS on this reimbursed amount. As per my understanding its just a reimbursment of the expenses that i have done of their behalf.
I am seeking your advice how it is considered as my income? can i ask my new company for not deducting any tax for it?
A V Vishal
(Expert) 30 June 2011
As for your query relating to tax, it is clear that you new company has perhaps paid the amount as advance income to you on joining their company and therefore based on the earnings tax deduction is made to your payment (Nomenclature may differ, whereas you treat it as a reimbursement the employer does not). Remember, any payment on account of breach is termed as penal and thee is no claim under direct taxes on penalties as this is on account of default committed by you. In the context of the principle the amount that you paid to your former employer is termed as penal and therefore you are not liable to claim deduction of the payment made from your income and this will be regarded as capital expenditure. The amount of tax deduction is always based on the net income chargeable to tax and if your income tax deducted is higher than your eligibility to tax, there is refund and on the contrary, there is shortfall you need to pay at the time of filing your returns for the previous year.
Dr. Imran Ahmad, MOZA
(Expert) 01 July 2011
Nisha
What is this X amount Buy-out, etc. Theory. But there are many heads in accounts. If company cares about their employees then their accounts section will help you. There is no much reasoning in this regard. Wishing you good at your new work place.
Regards.
