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I am an Indian citizen and resident. My ex-employer wants to pay tax on my behalf while I have only worked for them for two months.

My two month's salary is by no means equal or more than the minimum salary threshold for which income taxes have to be paid.

They, however, claim that the taxes will be paid on my behalf considering the income for one year.

By that I mean:

My annual salary (had I not quit): 5,00,000 > above minimum threshold for tax (requires 10% income tax). What I made in two months: 60,000 < miminum threshold for tax

My employer wants to pay: 10% of 60,000 = 6,000.

I feel that something is wrong here. My entire salary is not taxable, so why should the annual CTC be taxed, or why I should be taxed if my income at this firm doesn't even amount to the minimum threshold?

  • how long will you be working for this company? – MD-Tech Aug 21 '15 at 8:58
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    Can't vouch for India, but in the US this corrects itself when you file your yearly tax return forms. – keshlam Aug 21 '15 at 8:58
  • sorry I really mean how long will you be working in India? – MD-Tech Aug 21 '15 at 9:00
  • @MD-Tech I'm not sure how long I will be working in India. I quit this job last month (July) and will probably join another this September. I may or may not have to leave India in this financial year. – Chetan Bhasin Aug 21 '15 at 9:29
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They however claim that the taxes will be paid on my behalf considering the income for one year.

Yes that's right. They are required to consider the full years income and deduct tax in 12 equal portions, right from first salary.

You can claim refund while filing returns.

  • Thanks. Is it also true that the tax is deducted in CTC and not individual taxable components. Since medial and LTC are reimbursments and HRA and travel allowance are not fully taxable (from what I know)? – Chetan Bhasin Aug 23 '15 at 11:20
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Not only is it right that they should withhold tax based on your annualized salary, but in general for "non-resident aliens" the withholding is a higher rate, so even your 10% number seems low unless you benefit from a special tax treaty.

http://www.irs.gov/Individuals/International-Taxpayers/Withholding-of-Tax

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