Notice Period Buyout Calculator

What is notice period buyout?

When you join a new company before serving the full notice period at your old job (typically 60-90 days), the new employer often "buys out" the unserved days by paying your old employer the equivalent gross salary. This lets you join sooner.

The formula

Buyout = (Monthly Gross Salary ÷ 30) × Days Unserved

Example: Monthly gross ₹1.5 lakh, 60 unserved days = ₹3 lakh buyout. Some companies use Basic only (smaller); some use full CTC monthly (larger). Always confirm with HR which figure they use before accepting an offer.

Tax treatment (this part trips up many)

• Old employer:The notice salary they recover from your F&F is considered "notional salary income" you didn't actually receive — but they still treat it as income deducted from your final paycheck. You may be taxed on income you never got.CBDT clarified in 2017 that you can claim a deduction for the recovered amount, but employers don't always allow it; you may need to claim in your ITR directly.
• New employer: The buyout reimbursement they pay your old employer is treated as part of your salaryfor tax purposes — fully taxable at your slab rate. So if your new offer says "notice period buyout will be reimbursed," that ₹3L is added to your taxable salary that year.

How to negotiate buyout

1. Ask for it upfront in the offer. Once you sign, leverage drops.
2. Pin down whether it's gross monthly or basic-only. The gap can be 60% of the buyout.
3. Confirm tax treatment in writing. Best case: new employer treats it as a one-time joining bonus (taxable but you got the cash); worst case: paid directly to old employer with no deduction for you.
4. Try a hybrid approach. Serve 30 days, buy out 30 days. Often cheaper for the new employer.

Alternatives to buyout

• Use up your unused leaves. 30 days of leave = 30 fewer days of notice.
• Use casual/comp-off leaves. Same effect.
• WFH / partial overlap. Some companies let you start the new job remotely while serving notice.
• Negotiate a shorter notice period at old employer — they sometimes accept 30 days instead of 90 if you handover well.

What about contractual penalties?

Some employment contracts have a "minimum tenure" clause (e.g., must serve 18 months or pay back joining bonus + relocation + sign-on). Notice buyout doesn't cover this — you may owe additional money. Read your offer letter carefully before accepting a new job.

Related: salary calculator, leave encashment calculator, gratuity calculator, income tax calculator.