Retrenchment Allowanace

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120 Points Posted on 09 February 2009

Hi

I have a query on the tax liability on retrenchment allowance received.  A company was closing its Delhi operation and given a choice to entire employee either to relocate to some other units situated in India or can leave the orginsation in which 2 months salary would be given as compensation. Can the said compensation received be treated as Retrenchment allowance u/s 10B for tax exemption or can this compensation received be treated as tax exempted in any section of the IT Act?

Please clarify

Thanks & Regards

Ramesh

 

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On 09 February 2009 at 18:03 Report
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CHARTERED ACCOUNTANT
350 Points Posted on 09 February 2009

Yes, it is exempt u/s.10 (10B) to the extent of least of the following:

1) Amount calculated u/s.25F (b) of the Industrial Dispute Act or

2) Such amount as notified by the Central Government. (At present, it is Rs. 500000/- if a worker is retrenched after 31-12-1996).

Non-exempt portion is taxable u/s.17 (3) as Profit in lieu of salary under the head “Income from Salary”. Of course, it is subject to relief u/s.89.

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On 09 February 2009 at 18:33

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