Securing a good job is becoming increasingly difficult.

Work satisfaction and right compensation are two critical components of any job. If any of these factors are missing, people tend to switch your job.

But in the challenging economic environment, sometimes, good opportunities don’t come your way so quickly.

Unless you make a timely move, you may get stuck in job with no satisfaction.

To add to your trouble, the notice period at your current organisation could be long, say 3 months, and your new employer may insist you on joining either immediately or within a month.

Under such circumstances, you have two choices:
 

• Let go the opportunity
• Don’t serve the notice period and move on
   

Logically, you can’t let go lucrative opportunities—after all, it decides how your future would look like. Going with the second option may have some practical difficulties.

What could be the consequences of not serving the notice period?

You will have to compromise on the salary as your ex-employer may deduct it from your dues.

Alternatively, your potential employer may pay your current company in lump-sum and deduct it from your salary later, maybe in a piecemeal manner.

But in any case, the loss of income is yours. Perhaps, it costs you to pay for your better future. Mind you, your loss doesn’t end there. The Income Tax (I-T) department shows no mercy and recovers tax on the income you didn’t earn and unlikely to withdraw.

Now the I-T department cannot tax your notional income anymore.

Why?

The Income-tax Appellate Tribunal (ITAT)—adjudicator for the I-T disputes took exception to charging tax on the income deducted by the employer for not serving the notice period. The order passed by the Ahmedabad Bench of ITAT on April 18, 2017, stated that actual salary received can be taxed.

Commenting on the development Mr Gautam Nayak, tax partner, CNK & Associates said, "The ITAT has recognized the concept of real income, which is well accepted under I-T laws. It held that the salary against which notice pay was adjusted had not become due, as the net amount was paid by the employer. The employee had no right to receive the portion of the salary that had been deducted, under the terms of employment. Thus, the deducted amount could not be held as taxable salary income.”

Can this set a precedent for further improvements in the taxation procedures?

Apart from levying a tax on the salary as and when it becomes due (irrespective of whether or not it’s paid), the I-T department taxes another income on notional basis—income from the house property which is deemed to be let out. In other words, if a person has two house properties registered in his/her name, the I-T department assumes one of them (of the choice of the assessee) as let out and imposes a tax on it. Now it remains to be seen as to what would be the impact of ITAT’s latest order on a similar practice.

PersonalFN is of the view that, you shouldn’t conceal your income and dodge tax authorities. Instead, ensure you utilise all legal provisions that enable tax saving. Moreover, tax planning can’t be done in isolation, instead complement it with investment and financial planning, where your long-term financial goals can be successfully accomplished.

Remember, a holistic approach to one’s finances serves the bigger purpose.

All your investment and tax planning decisions should be in line with your financial objectives and shall account for your risk appetite.

Are you in search of a qualified and competent financial planner whom you can trust for his/her ethical values and integrity? Then, you should meet a Certified Financial Guardian in your vicinity.
 

Add Comments

Comments
arachni_text Jan 06, 2019 arachni_text
arachni_text"'`-- Jan 06, 2019 arachni_text
arachni_text Jan 06, 2019 arachni_text
arachni_text Jan 06, 2019 arachni_text
arachni_text Jan 06, 2019 arachni_text

 1 2 3