Any amounts paid by the employer to the employee for premature termination of a contract of employment are treatable as taxable or tax free in hands of employee ?
Everything paid to Employee by Employer is taxable unless it is a Gratuity as per Gratuity Act.
Any such compensation paid by employer for termination of contract without serving the required notice period will be part of the employee’s taxable income.
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One Question : Can the employee obtain a deduction for legal expenses incurred in relation to the termination of employment/contract?