I would like to know from the group as to whether you deduct TDS from the notice pay reimbursements that you give to new employees and if so, why is it so?Does it not fall under the exempted category, as the same is a form of reimbursement and not earning?

regards,

reshma

In my opinion, TDS should be deducted from payments made to compensate notice period deductions. Couple of points on why such payments cannot be treated as exempt reimbursements:

1. Notice period deduction happened while the individual was employed in the previous organization.

2. More importantly, this deduction is on account of a breach of contract by the individual, and therefore, is penal in nature.

Regards,

S Negi

And more over, all such payments are considered as income in the hands of the employee, so will attract tax implications and hence such deductions at source..

roshni