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<h1>Retrenchment compensation exemption governs tax treatment of workmen's payments, approved schemes, and excess salary taxation.</h1> Retrenchment compensation received by a workman is exempt from income tax to the extent permitted by the statutory limit and subject to the retrenchment conditions under the Industrial Disputes Act, 1947 and related service instruments. The exemption generally applies to compensation received under the Industrial Disputes Act, 1947, other applicable enactments, standing orders, awards, contracts of service, or approved schemes, and is limited to the least of the actual amount received, the amount calculated under section 25F(b), and the amount notified by the Central Government. Compensation above the exempt limit is taxable as salary income.