Salary comensation

u/s10C of income tax act severance amount paid up to Rs.5,00,000/- is exempted.

Please find below extract of the Sec 10C which relate to the present case study.

CHAPTER III

INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME

Incomes not included in total income.

10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—

(1) agricultural income ;

and so on...

⁶²[(10C) ⁶³ any amount received⁶⁴ ⁶⁵ [or receivable] by an employee of—

(i) a public sector company ; or

(ii) any other company ; or

(iii) an authority established under a Central, State or Provincial Act ; or

(iv) a local ⁶⁶[authority ; or]

⁶⁷ [(v) a co-operative society ; or

(vi) a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956) ; or

(vii) an Indian Institute of Technology within the meaning of clause (g) of section 3⁶⁸ of the Institutes of Technology Act, 1961 (59 of 1961) ; or

⁶⁹ [(viia) any State Government; or]

⁷⁰[(viib) the Central Government; or]

⁷¹ [(viic) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette⁷², specify in this behalf; or]

(viii) such institute of management as the Central Government may, by notification ⁷³ in the Official Gazette, specify in this behalf,]

⁷⁴[on his] ⁷⁵ [voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees] :