TDS on compensation

malipeddi jaggarao (Querist) 24 December 2010 This query is : Resolved
Certain ex-employees of the company resorted to legal remedy under ID Act for payment of gratuity, arrears of salary, bonus, medical aid, LTC etc. The Company settled the matter with them out of court and willing to award a lumpsum amount as compensation in lieu of all their demands. The employees agreed for the proposal. Whether TDS is deductable on this lumpsum amount. The Company calls it as lumpsum compensation.

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Arun Kumar Bhagat (Expert) 24 December 2010
No it is not applicable.

Rajesh Thakker (Expert) 25 December 2010
Dear Malipeddi,
I am not agree with Mr. Arun Bhagat. The comepnsation is given in lieu of salary. Therefore, it is payment towards the salary. Hence TDS provision will applicable for said payment.

s.subramanian (Expert) 25 December 2010
I agree with Mr.Rajesh.

Kirti Kar Tripathi (Expert) 26 December 2010
On compensation all the legal deduction are to be made. Even TDS is liable to be deducted. There is no exemption from any deduction under the law.

Pritam Saini, Advocate (Expert) 26 December 2010
i agree with MR.RAJESH

Advocate. Arunagiri (Expert) 26 December 2010
If there is any basis for the calculation of the compensation, TDS shall be deducted based on that calculation, not on the entire amount.

Ajay Bansal (Expert) 27 December 2010
ARUN IS CORRECT.

Gulshan Tanwar (Expert) 27 December 2010

Gulshan Tanwar (Expert) 27 December 2010
It amounts to Compromise and not compensation; and hence TDS is to be calculated on that amount and not entire amount.

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