Notice Period & Buyout Calculator India 2026
Calculate your notice period shortfall recovery amount, 18% GST liability, total payable to your outgoing company, and net personal expense after new employer buyout reimbursement.
Calculator InputsIndia Corporate Rules
Calculation ResultsDaily Rate: ₹1,667
Gross Buyout Amount
₹1,00,000
Base recovery for 60 shortfall days based on ₹₹1,667/day basic rate.
GST Liability (18%)
₹18,000
Calculated as 18% of gross notice recovery under CBIC Circular 178/10/2022.
Net Amount Payable to Company
₹1,18,000
Net Expense after Reimbursement
₹1,18,000
No new employer reimbursement entered. Enter reimbursement amount on the left if your new company covers buyout.
Notice Period Buyout Itemized Breakdown
| Component | Value / Basis | Amount (₹) |
|---|---|---|
| Monthly Basic Salary | As specified in salary slip | ₹50,000 |
| Daily Basic Salary Rate | Monthly Basic ÷ 30 days | ₹1,667/day |
| Required Notice Period | Employment contract requirement | 90 Days |
| Notice Days Served | Actual days worked during notice | 30 Days |
| Shortfall Days to Buy Out | Required Days - Days Served | 60 Days |
| Gross Buyout Amount (Notice Pay) | 60 Shortfall Days × ₹1,667 | ₹1,00,000 |
| GST on Buyout (18%) | 18% tax on Gross Buyout (CBIC) | +₹18,000 |
| Total Net Amount Payable to Company | Gross Buyout + GST Liability | ₹1,18,000 |
| New Employer Buyout Reimbursement | Covered by new joining company | - ₹0 |
| Net Personal Out-of-Pocket Cost | Total Payable - Employer Cover | ₹1,18,000 |
Income Tax ActTax Implications under Section 15 & 17(3) of Income Tax Act
When navigating job switches in India, notice period buyouts involve taxation at two distinct levels: notice pay recovery by the outgoing employer and notice pay reimbursement from the new employer.
1. Notice Pay Recovery (Outgoing Employer)
Under Section 15 of the Income Tax Act, 1961, salary is taxable on an accrual or receipt basis, whichever is earlier. Historically, tax officers argued that notice pay recovered by an employer cannot be deducted under Section 16 because Section 16 only specifies Standard Deduction, Entertainment Allowance, and Professional Tax.
However, multiple Income Tax Appellate Tribunal (ITAT) rulings—including Nandhoori Kameswara Rao vs ITAT and DTE (IT) vs. R.P. Software—have held that only the net real income received by the employee after deducting notice pay recovery should be taxed. It is advisable to request your ex-employer to adjust notice pay recovery in Form 16 under gross salary.
2. Buyout Reimbursement (New Employer)
If your new employer reimburses the notice buyout amount, the tax department classifies this reimbursement under Section 17(3)(iii) as "Profit in lieu of salary".
The reimbursed amount is added directly to your gross taxable income for the financial year and is subject to Tax Deducted at Source (TDS) according to your applicable slab rate under the Old or New Tax Regime.
Corporate PoliciesStandard Notice Period Policies in Indian IT Companies
In major IT services firms in India, 90 days (3 months) is the standard contractual notice period. Below is how leading IT majors handle notice period buyouts:
TCS (90 Days)
Tata Consultancy Services
- Mandatory 90 days for all full-time employees.
- Buyout calculated strictly on Monthly Basic Salary.
- Requires Delivery Manager (DM) and HR Manager approval.
- KT (Knowledge Transfer) sign-off mandatory before F&F.
Wipro (90 Days)
Wipro Limited
- 90 days for Band B1, B2, B3, C, and D employees.
- Shortfall recovery based on daily basic pay rate.
- Buyout subject to project release and client clearance.
- 18% GST added to F&F notice recovery invoice.
Infosys (90 Days)
Infosys Limited
- 90 days notice for Job Level 4 (JL4) and above.
- Notice waiver or buyout at management discretion.
- Earned leaves (EL) can be offset against notice shortfall.
- Reimbursement by new employer treated under Sec 17(3).
How Notice Period Buyout Works During a Job Switch
Resignation & Request
Resign on the HR portal and discuss early release date options with your reporting manager and HR.
Buyout Clause Offer
Get explicit confirmation from your new employer in the offer letter or buyout addendum specifying reimbursement terms.
F&F Recovery & GST
Pay the notice pay recovery amount + 18% GST in your Full & Final (F&F) settlement or get it deducted from final pay.
Reimbursement Claim
Submit ex-employer F&F receipt and payment proof to your new employer’s HR to claim reimbursement in salary.
Frequently Asked Questions (FAQs)
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