Retrechment compensation

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Querist : Anonymous

Querist : Anonymous (Querist)

15 September 2015 Friend i have received Lumsum amt Rs.200000
other than grauity & leave encashment & exgratia in full final settlement from empoyer,

after discontinue of hospital .
Can i consoider Rs.200000 as retrenchment compensation if not mentioned in full & fin al settlement sheet. & same eligible for retrenchment compensation exemption

Querist : Anonymous

Querist : Anonymous (Querist)

15 September 2015 is any one able to answere of my question

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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21 July 2025 Good question!

If you received a lump sum amount of Rs. 2,00,000 from your employer other than gratuity, leave encashment, and ex-gratia, but the amount is not explicitly mentioned as retrenchment compensation in the full and final settlement, then:

Can it be considered as retrenchment compensation?
No, not automatically.
The nature of payment matters. To claim exemption under Section 10(10B) (which covers retrenchment compensation), the payment must be:

Specifically given on account of retrenchment (or termination due to closure/downsizing, etc.)

Clearly identified/documented as retrenchment compensation in the settlement or agreement.

If the payment is not specifically mentioned as retrenchment compensation, the Income Tax Department may treat it as ordinary income or other taxable payment.

Is it eligible for retrenchment compensation exemption?
Only if it qualifies as retrenchment compensation under the law.

Mere receipt of lump sum amount without clear classification will make it hard to claim exemption.

What should you do?
Check the settlement letter or agreement carefully.

If possible, get a written confirmation from employer specifying the nature of the Rs. 2,00,000 as retrenchment compensation.

If no such document, it might be treated as taxable income.

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