One of our client has received Compensation as the company is Closing Down. Shall he get Exemption of Retirement compensation under VRS or any other Compensation? Kindly Guide.
Regards,
Harshad Kanekar (Taxation and Accounts Executive) (314 Points)
07 May 2016One of our client has received Compensation as the company is Closing Down. Shall he get Exemption of Retirement compensation under VRS or any other Compensation? Kindly Guide.
Regards,
Ranjeet
(Articleship)
(36 Points)
Replied 07 May 2016
Assuming that employee is near the age of retirement In my opinion you may treat it as VRS.Provided that your client is employee and he does not have any stake in the company
Harshad Kanekar
(Taxation and Accounts Executive)
(314 Points)
Replied 07 May 2016
But Technically he isn't taking VRS. It is Compulsory Retirement that too not on attaining the age applicable.
Ranjeet
(Articleship)
(36 Points)
Replied 10 May 2016
But then what else we can treat this income. It can be only taxable under salary head as it is received from his employer. Else it can be treated as income under other source as compensation received from his former employer.Tell me your opinion what can be done in this regard ??
Harshad Kanekar
(Taxation and Accounts Executive)
(314 Points)
Replied 10 May 2016
As per My Opinion it is taxable in Salary and no Exemption can be available. But some of my friends suggested that exemption can be claimed under VRS. So I need Professional Opinion on your side.
Regards,
Ranjeet
(Articleship)
(36 Points)
Replied 11 May 2016
An employee, who has attained the age of 50 years or who has completed 20 years of qualifying service, may retire from service, by giving a notice of not less than three months, in writing, direct to the appointing, authority, with a copy marked to his immediate superior Officer. Before giving such notice he may satisfy himself by means of a reference to such authority, that he has completed the required minimum number of years or qualifying service.
Refer this link
https://agl.tnebnet.org/pens/rettips/retvolu.H T M L
So in my opinion If your client satisfies above conditions then he may take benefit of exemption for VRS as per IT act. If you are taking benefit of exemption it should be noted that the prescribed limit should not be exceed in entire life time i.e. Rs.500000/- (At Present).
CAclubindia
