Retrenchment Compensation - [Section 10(10B)] - Income Tax - Ready Reckoner - Income Tax

Retrenchment Compensation [Section 10(10B)] Retrenchment compensation received by an assessee at the time of his retrenchment, shall be exempt to the least amount from the following : ( i ) Actual amount received (ii) an amount calculated in accordance with the provisions of section 25F(b) of the Industrial Disputes Act, 1947 which is equal to 15 days average pay for each completed year of continuous service or any part thereof in excess of 6 months, ( iii ) amount specified by the Central Government, i.e. ₹ 500,000. NOTES: Compensation received in excess of the aforesaid limit is taxable and would form part of Gross Salary. However assessee will be eligible for relief u/s 89 read with Rule 21A. Compensation received by a workmen at the time of closing of down of the undertaking in which he is employed shall be deemed to be the compensation received at the time of retrenchment. Compensation received at the time of transfer of ownership of management and the service of such workmen has been affected then such compensation shall also be deemed to be received at the time of retrenchment. Where the assessee received certain amount as Ex-gratia as result of out of court settlement of dispute with his employer and his services is terminated immediately thereafter, such an arrangement is nothing but termination of employment on payment of compensation and the assessee is entitled for exemption u/s 10(10B). [ Vishnu Mohan T Nair v. ITO 2018 (1) TMI 324 - ITAT AHMEDABAD ]