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Estimate the cost of buying out your remaining notice period and understand the tax implications of reimbursement.
Notice period buyout reimbursement is considered a taxable perquisite. The amount paid by your new employer will be added to your taxable income.
A notice period buyout occurs when an employee wants to leave their current organization before serving the full notice period mentioned in their employment contract.
If you pay your current employer for the unserved notice period, it is usually a recovery of salary and is not tax-deductible for you.
If your new employer reimburses the buyout amount, it is treated as "Salary in lieu of notice" and is fully taxable in your hands.
Buyout is usually a mutual agreement. While most contracts have a buyout clause, some employers may insist on serving the notice period for critical roles or knowledge transfer.
If your new employer reimburses the buyout amount, it is considered a taxable perquisite. However, if you pay it yourself from your own pocket, you don't get any tax benefit on that payment.
Most companies calculate it as (Gross Salary / 30) * Number of unserved days. Some companies might use Basic Salary instead of Gross, depending on the contract.
This depends entirely on your company's HR policy. Many companies allow 'Leave Adjustment' where your pending earned leaves are used to reduce the notice period days.
The employer may withhold your relieving letter, experience certificate, and final settlement (Full & Final). It could also lead to legal action for breach of contract.