Is the compensation on Voluntary Retirement Scheme (VRS) taxable?
Compensation on account of VRS is
taxable as profits in lieu of Salary as per section 17(3) of the Income Tax
Act. But in case of VRS by employees of Government/Semi-Government/Local
Authorities/PSUs etc, this compensation is exempt up to the amount of Rs.
500,000/- if the payment is in accordance with a voluntary retirement scheme as
per the prescribed guidelines. However, no exemption under any other section
for this amount is allowed to the taxpayer nor is he eligible to claim the
benefits u/s 89(1) of the Act.
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I am entitled to the compensation from the employer on account of VRS in a particular year but have received the same in the succeeding years in instalments. When is it taxable?
In terms of section 15 and 17(3) the VRS compensation has accrued in the year in which your right to receive the same became crystallised. Therefore, the entire compensation will be taxable in the first year when it became due.
Will the VRS be tax exempt if it is given in addition to normal retirement benefits like PF, gratuity, pension etc. under employment terms?
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