• Type: Publication series
  • Date: 1/9/2013

India – High Court Allows Hypothetical Tax as Deduction from Income 

KPMG in India reports on the Bombay High Court’s decision confirming the permissibility of a reduction (withholding or deduction) in respect of the hypothetical tax from a taxpayer’s salary. The High Court’s ruling has re-affirmed the position that only the incremental tax liability actually borne by the employer on behalf of an employee ought to be taxed as salary. The hypothetical tax that is withheld or deducted from the employee’s salary represents the tax costs to be borne by the employee and hence cannot be added to the income of the employee.

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