Notice Period Buyout Calculator
Leaving before your notice period ends? See what you'll owe your old employer, why there's no GST on it, and what you actually keep if your new employer pays it back.
How it works
No law sets the notice pay amount — your employment contract does. This calculator takes its two variables, the pay basis and the day count, as inputs. The no-GST position is para 7.5 of CBIC Circular 178/10/2022-GST. A reimbursement from your new employer is run through the same tax engine as the in-hand salary calculator as a one-off payment on top of your new CTC — taxed at the top of your income, like a bonus. If you also earned from your old employer in the same tax year, your real rate can be higher.
Switching jobs? Compare the offer itself with the salary hike & offer calculator.
Sources & further reading
Section numbers are the Income-tax Act, 2025's, with the 1961 Act's in brackets.
Law and official notices
- Circular No. 178/10/2022-GST — GST on liquidated damages, compensation and penalties (para 7.5) — Central Board of Indirect Taxes & Customs, 3 Aug 2022
- Income-tax Act, 2025 (No. 30 of 2025) — Gazette of India, 21 Aug 2025, in force 1 Apr 2026
- Income-tax Rules, 2026 — G.S.R. 198(E) — Central Board of Direct Taxes, 20 Mar 2026
Frequently asked questions
How is notice period buyout calculated?
Days you don't serve × one day's pay, where your contract says what "pay" means — usually Basic, sometimes gross — and whether a day is a 30th or a 26th of it. Leaving after 30 days of a 90-day notice on ₹50,000 Basic costs ₹1,00,000.
Is GST charged on notice pay?
No. CBIC Circular 178/10/2022-GST (para 7.5) says salary forfeited or bond money recovered when an employee leaves before an agreed period is a penalty, not payment for a service — so it isn't a supply and carries no GST. Notice pay recovered for leaving early is the same kind of amount.
Is the reimbursement from my new employer taxable?
Yes — it's salary, and if the new employer pays your old one directly it's a perquisite under section 17(1)(f) of the Income-tax Act, 2025 (an obligation of yours paid by your employer). On a ₹20 lakh CTC in the New Regime, reimbursing that ₹1,00,000 adds about ₹20,800 in tax.
Can I deduct the notice pay I paid from my taxable income?
The Act has no deduction for it. If your old employer takes it out of your final pay, check whether your Form No. 130 (the salary TDS certificate that replaced Form 16) shows your salary before or after the recovery. If it's before, you'd be taxed on money you never got — ask your employer to correct it or speak to a chartered accountant.
Can I set my leave balance against the notice period?
Only if your employer's policy allows it — many don't. If yours does, enter the leave days and they come off the shortfall.