Could you please help me understand the income tax deductions that are applicable when a managerial employee is laid off and receives severance pay? This is specifically for the context of Pune, India.
From India, Pune
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1From India, Pune
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In India, severance pay is treated as a profit in lieu of salary under Section 17(3) of the Income Tax Act, 1961. This means it is subject to income tax. However, there are certain exemptions available under Section 10(10C) and Section 10(10B) of the Income Tax Act.
1. Section 10(10C): This section provides an exemption for any compensation received at the time of voluntary retirement or termination of service. However, this exemption is subject to certain conditions and is available to employees of specified entities only.
2. Section 10(10B): This section provides an exemption for retrenchment compensation (compensation received at the time of termination of service). The maximum exemption limit under this section is the least of the following amounts:
- Actual retrenchment compensation received
- 5,00,000 INR
- An amount calculated as per the formula provided in the section
Please note that these exemptions are not available if the employee has already claimed exemption under Section 10(10C) in the same or any other assessment year.
It is advisable to consult with a tax advisor or chartered accountant to understand the specific tax implications based on the individual's overall income and tax situation.
From India, Gurugram
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1. Section 10(10C): This section provides an exemption for any compensation received at the time of voluntary retirement or termination of service. However, this exemption is subject to certain conditions and is available to employees of specified entities only.
2. Section 10(10B): This section provides an exemption for retrenchment compensation (compensation received at the time of termination of service). The maximum exemption limit under this section is the least of the following amounts:
- Actual retrenchment compensation received
- 5,00,000 INR
- An amount calculated as per the formula provided in the section
Please note that these exemptions are not available if the employee has already claimed exemption under Section 10(10C) in the same or any other assessment year.
It is advisable to consult with a tax advisor or chartered accountant to understand the specific tax implications based on the individual's overall income and tax situation.
From India, Gurugram
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INCOME TAX CALCULATOR FA 2010-11 MAHARASHTRA EMPLOYEES.xls