Seeking Clarification on Tax Implications for Ex-Gratia Payment Received After layoff

[Karan]

Hi,
I was laid off from my job and was paid 4 months salary as ex gratia subsection under the salary section in my Form 16. I was a manager in my last role and the ex-gratia amount is 17 lacs and was taxed by this employer in its entirety(not 12.5 lacs u/s 10b or 10c). This is adding substantial tax this AY, esp in year that’s been so turbulent. Can someone please help if there’s any deduction allowed? I see conflicting reads on the internet about ex-gratia taxability, with some saying its not taxable at all and some saying everything is taxable.

AI Summary

Ex-gratia termination pay taxable under Section 17(3) unless strict Section 10(10B)/10(10C) criteria met; use Section 89(1) relief An ex-gratia termination payment treated as 'profits in lieu of salary' is generally taxable under Section 17(3) unless it meets strict exemption criteria under Section 10(10B) (retrenchment) or Section 10(10C) (voluntary retirement scheme). Where the employer has taxed the full amount and the payment was not under a notified VRS or retrenchment scheme, the amount is taxable; the primary practical relief is computation under Section 89(1) to spread tax impact, claimed by filing Form 10E before the ITR. Some tribunal decisions favor employees, but exemptions depend on fact-specific statutory conditions.