TaxTMI 
TaxTMI 
TaxTMI 
Deductions available for severance received
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....eductions available for severance received<br> Query (Issue) Started By: - Karan Dated:- 29-8-2025 Last Reply Date:- 15-12-2025 Income Tax<br>Got 1 Reply<br>Income Tax<br>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. Reply By Ryan Vaz: The Reply: Issue Summary ....
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.... Tax treatment of severance pay (3 months' salary) received on termination by a managerial employee. Applicable Law * Section 17(3), Income-tax Act, 1961 - Profits in lieu of salary * Section 10(10B) - Retrenchment compensation (workmen only) * Section 10(10C) - VRS exemption (subject to conditions) * Section 16(ia) - Standard Deduction Rs. 50,000 Short Practical Answer For a white-coll....
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....ar/managerial employee, severance received on termination is fully taxable as Salary under Section 17(3). There is no specific exemption or deduction available merely because it is severance. You may, however, claim the standard deduction of Rs. 50,000. Key Reasons * Severance = Salary Compensation received at termination is treated as profits in lieu of salary and taxed in the year of rece....
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....ipt. * No exemption under Section 10 * Section 10(10B) applies only to workmen under the Industrial Disputes Act, not managerial staff. * Section 10(10C) applies only if payment is under a CBDT-approved VRS, which normal severance is not. * Standard Deduction Allowed A flat Rs. 50,000 deduction under Section 16(ia) is available from total salary income, including severance. Illustration....
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.... Severance received: Rs. 3,00,000 Severance (Salary) Rs. 3,00,000 Less: Standard Deduction Rs. 50,000 Taxable Amount Rs. 2,50,000 This is added to your total income and taxed as per slab rates. Caveats * If the payment is under a VRS, court settlement, or described as ex-gratia, tax treatment may differ. * Relief under Section 89 is generally not available for severance. Action Plan * R....
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....eview termination/severance agreement * Check Form 16 and TDS under Section 192 * Claim standard deduction in ITR * Reconcile Form 26AS/AIS * Consult a CA if payment structure is unclear<br> Discussion Forum - Knowledge Sharing ....