Any amount due to or received, whether in lump sum or otherwise, by an assessee from any person before his joining any employment with that person or after cessation of his employment with that person shall be considered as “Profit in lieu of salary”.

Profit in lieu of salary is a part of salary income. It is included in gross salary and taxed accordingly. Profit in lieu of salary generally means any payment made to an employee on lieu of salary even if the same has no connection with the profits of the employer. The word ‘profit’ is used only to convey any ‘advantage’ or ‘gain’ by receipt of any payment by the employee.

Moreover, now the terminal payments by employer are also considered as “Profit in lieu of salary” and taxed accordingly.

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