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Voluntary Retirement or Separation - [Sec. 10(10C) AND RULE 2BA] - Salary Income - Income Tax

Voluntary Retirement or Separation - [Sec. 10(10C) AND RULE 2BA]
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VOLUNTARY RETIREMENT OR SEPERATION [Sec. 10(10C) AND RULE 2BA]

1. If an employee receives compensation(whether in one go or in installments) on voluntary retirement or separation, Sec 10(10C) provides for exemption for such amount, subject to a maximum of 5,00,000.

2. This exemption is available to employee of any of the following:

  • a public sector company
  • any other company
  • an authority established under a Central, State or Provincial Act
  • a local authority
  • a co-operative society
  • a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956
  • an Indian Institute of Technology within the meaning of clause (g) of section 378 of the Institutes of Technology Act, 1961 (59 of 1961)
  • any State Government
  •  the Central Government
  • an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette82, specify in this behalf
  • such institute of management as the Central Government may, by notification83 in the Official Gazette, specify in this behalf
  • Conditions for claiming exemption [Rule 2BA]
    • It applies to an employee who has completed 10 years of service or completed 40 years of age. (This condition doesn’t apply to employees of public sector company)
    • It applies to all employees including workers and executives except directors of a company or co-operative society.
    • Such scheme has been drawn to result in overall reduction in no. of employees
    • The vacancy caused by voluntary retirement is not to be filled up.
    • The retiring employees of a company shall not be employed in another company or concern belonging to the same management.
    • Amount receivable on account of voluntary retirement does not exceed either of the following amount:
      1. 3 months x Last Drawn Salary x completed year of service
      2. Last Drawn Salary x balance of months left before the date of retirement or superannuation
  • Salary includes basic pay, dearness allowance (if it forms part of the retirement benefits) and percentage wise fixed commission on turnover.
  • If the assessee has already taken relief u/s 89, then exemption under this section is not available.
  • Deduction u/s 10(10C) can be taken once only, therefore if deduction under this section is taken once then deduction is not available in any subsequent years.

 

 
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