Voluntary Retirement or Voluntary Separation - [Section 10(10C) read with Rule 2BA] - Income Tax - Ready Reckoner - Income Tax

Voluntary Retirement or Voluntary Separation [ Section 10(10C) read with Rule 2BA ] 1. If an employee receives compensation (whether in one go or in installments) on voluntary retirement or separation, Section 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 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 Gazette, specify in this behalf such institute of management as the Central Government may, by notification 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: 3 months x Last Drawn Salary x completed year of service 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.