Sir,What is the tax treatment of salary withheld for not serving the company for full notice period.?

Question

Say for example:
April -March - 12 months salary
Notice Period - 3 months
Notice Period not served - 2 months
so will the TDS deductible by company is for a period of (12- 2 = 10 months) or for 10 months only or
Salary received 10 months - 2 months salary withheld or paid back = 8 months
So will the taxable income is for 12 months/10 months/8 months and what is the section of the IT rule that deals with that.
Please reply immediately.
Regards,
Om

Answer 1

I assume you are talking about the tax laws in the U.S.

Your contractual agreement with the company does not affect your government taxation. Taxes are based on your expect annual rate of income. There are various rates of pay, called "Tax Brackets" that basically designated a certain percentage of the your expected tax liability. Typically, the more you make, the more you pay. However, tax deductions throughout the year are simply an estimate. They may not be your actual tax rate at the end of the year. At the end of the year, people who work in America, file a form 1040, 1040A, or 1040EZ with the government. The form they use helps them calculate what their actual pay was (gross pay minus any legitimate deductions), how much they contributed to their tax liability, and what their remaining liability or credit for the year might be. Considering that you worked only 10 months, your estimated taxes were probably calculated based on the anticipation that you were planning to work the entire year. Therefore, I would guess that you'll be in a lower tax bracket than was orignally estimated and you should be due a return.