TaxTMI 
TaxTMI 
Hi,
Are there any deductions available for severance received when employment was terminated. I received 3 months of salary as severance. I was a white collared managerial employee.
Deductions available for severance received
29 Aug 2025 
1 Reply 
1234 Views Asked by
Severance pay treated as salary; taxable, with only standard deduction available unless VRS or workmen exemption applies.
Severance paid to a managerial employee is treated as profits in lieu of salary and taxed as salary in the year of receipt; ordinary severance to non-workmen carries no specific exemption. Exemptions for retrenchment compensation are limited to workmen, and VRS exemptions apply only when payments meet VRS conditions. A flat standard deduction from salary income is available, but relief under arrears/related provisions is generally not available. Confirm payment characterization, TDS under salary provisions, claim the standard deduction in the return, and seek professional advice if payment structure is unclear. (AI Summary)
Severance paid to a managerial employee is treated as profits in lieu of salary and taxed as salary in the year of receipt; ordinary severance to non-workmen carries no specific exemption. Exemptions for retrenchment compensation are limited to workmen, and VRS exemptions apply only when payments meet VRS conditions. A flat standard deduction from salary income is available, but relief under arrears/related provisions is generally not available. Confirm payment characterization, TDS under salary provisions, claim the standard deduction in the return, and seek professional advice if payment structure is unclear. (AI Summary)