Any amount received / receivable by a specified category of an employee under the voluntary retirement scheme or under the voluntary separation scheme is exempted under section 10(10C) of the Income Tax Act. Under the present article, exemption provisions of section 10(10C) are taken up and explained meticulously.
Provisions of section 10(10C) exempt any compensation received at the time of voluntary retirement or voluntary separation or termination of service provided all the conditions are satisfied-
1. The compensation should have been received at the time of voluntary retirement or termination of service. However, in the case of an employee of the public sector company, the compensation should have been received at the time of voluntary separation.
2. The compensation should have been received by the specified categories of an employee (list of the same is provided under the next point).
3. The compensation should have been received in accordance with the scheme of voluntary retirement. In the case of a public sector company, the compensation should have been received in accordance with the scheme of voluntary separation.
Exemption under section 10(10C) is available towards the amount received (receivable) on voluntary retirement or termination of service by an employee of the following undertaking-
Lower of the following amount is available as a maximum exemption under section 10(10C)–
The exemption under section 10(10C) of the Income Tax Act is available only if the voluntary retirement scheme is framed, by the company/ authority/ co-operative society/ university/ institute, satisfying the below criteria prescribed under rule 2BA-
1. The scheme applies to an employee who has either completed 10 years of service or has completed 40 years of age.
2. It should be noted that the above criterion doesn’t apply to the amount received by the employee of a public sector company under the voluntary separation scheme framed by the public sector company.
3. The scheme should apply to all the employee, which includes workers and executives of a company or a co-operative society or an authority, except directors of a company or a co-operative society.
4. The voluntary retirement / voluntary separation scheme should have been drawn to result in an overall drop in the current strength of the employees.
5. The vacancy resulted from the voluntary retirement / voluntary separation scheme is not to be filled up.
6. The voluntary retiring employee shall not be employed in another company/ concern belonging to the same management.
7. The amount receivable of the employee under the voluntary retirement / voluntary separation scheme should not exceed-
a. The amount equal to 3 months salary for each completed years of service; or
b. The amount equal to salary at the time of retirement X balance months of service left before the date of retirement/ superannuation.
Please note ‘salary’, as mentioned above, includes basic salary, dearness allowance (if forms part of retirement benefit) and commission based on fixed percentage of turnover.
Table – Articles on Section 10 Exemptions
|1||Section 10(1)– Exemption to Agricultural Income|
|2||Section 10(2) Exemption to amount received by co-parcener from HUF|
|3||Section 10(2A) Exemption towards share of income from firm/LLP|
|4||Exemptions towards interest to non-residents | Section 10(4) & 10(4B)|
|5||Exemption on Tax paid by Govt or Indian concern on certain income of a foreign company|
|6||Section 10(7) Perquisites/allowances exemption to Govt employees serving outside India|
|7||Exemption- Section 10(8A) & section 10(8B) of Income Tax Act|
|8||Exemption towards commuted value of pension Section 10(10A)|
|9||Exemption towards retrenchment compensation received by workman Section 10(10B)|
|10||Section 10(10BC) Exemption towards compensation received on account of any disaster|
|11||Section 10(10C) Exemption of amount received on voluntary retirement|
|12||Exemption towards tax paid by employer on non-monetary perquisites: Section 10(10CC)|
|13||Section 10(10D) Exemption towards amount received under a Life Insurance Policy|
|14||Exemption for amount received from Statutory & Recognized PF|
|15||Exemption for payment from approved superannuation fund Section 10(13)|
|16||Income Tax Exemption on prescribed allowances/ benefits | Section 10(14)|
|17||Section 10(15) Exemption- Interest on Bonds, Debentures, Securities|
|18||Scholarship exemption | Section 10(16) | Income Tax Act 1961|
|19||Exemption towards income for administration of Charitable or Religious Institution|
|20||Section 10(32) Exemption | Income of minor clubbed with parent|
|21||Exemption for dividend income received from Indian Company | Section 10(34)|
|22||Section 10(34A) Exemption towards income received by a shareholder on buy back of shares|
|23||Section 10(35) Exemption towards income received from units|
|24||Section 10(37) Exemption towards Capital Gain arising on Compulsory Acquisition of Urban Agricultural Land|