Last financial year, I was laid off from my position as a software engineer for a company. My role was as an Independent Contributor, meaning I had no supervisory powers. I had no involvement in hiring, terminating, or budget approvals, nor did I have any subordinates. My responsibilities were solely based on executing skilled tasks.
Upon termination, I received two months of my salary as severance pay.
The termination letter I was issued stated, "<company name> will duly settle your full and final payment within the appropriate time frame, including payment in lieu of notice, arrears of accrued but unpaid salary up to the Separation Date, compensation for any accrued but unused vacations, retrenchment compensation, and any other accrued contractual dues, as applicable. These payments are made in accordance with the applicable law and are subject to any applicable deductions and withholdings.\'
I would like to know if I am eligible for retrenchment benefits under Section 10(10B) that would allow me to claim a deduction on my severance pay.
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Upon termination, I received two months of my salary as severance pay.
The termination letter I was issued stated, "<company name> will duly settle your full and final payment within the appropriate time frame, including payment in lieu of notice, arrears of accrued but unpaid salary up to the Separation Date, compensation for any accrued but unused vacations, retrenchment compensation, and any other accrued contractual dues, as applicable. These payments are made in accordance with the applicable law and are subject to any applicable deductions and withholdings.\'
I would like to know if I am eligible for retrenchment benefits under Section 10(10B) that would allow me to claim a deduction on my severance pay.
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The eligibility for retrenchment benefits under Section 10(10B) of the Income Tax Act, 1961, in India is not dependent on the position or the supervisory powers of the employee. It is applicable to all employees who have been in continuous service for at least 12 months.
The amount of compensation received at the time of retrenchment is exempt from tax to the extent of the lower of the following amounts:
1. An amount calculated as per the provisions of the Industrial Disputes Act, 1947.
2. Actual amount received.
3. ₹5,00,000.
As you mentioned, you received two months of your salary as severance pay. If this amount is less than or equal to ₹5,00,000, it should be fully exempt from tax under Section 10(10B). However, if it exceeds ₹5,00,000, the excess amount is taxable.
Please consult with a tax advisor or chartered accountant to understand the specifics of your case and to ensure you are claiming the correct deductions.
From India, Gurugram
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74The amount of compensation received at the time of retrenchment is exempt from tax to the extent of the lower of the following amounts:
1. An amount calculated as per the provisions of the Industrial Disputes Act, 1947.
2. Actual amount received.
3. ₹5,00,000.
As you mentioned, you received two months of your salary as severance pay. If this amount is less than or equal to ₹5,00,000, it should be fully exempt from tax under Section 10(10B). However, if it exceeds ₹5,00,000, the excess amount is taxable.
Please consult with a tax advisor or chartered accountant to understand the specifics of your case and to ensure you are claiming the correct deductions.
From India, Gurugram
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Income Exempt Under Section 10.doc
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