Voluntary Retirement scheme

I am bit confused related to the treatment of Voluntary Retirement scheme exemption available under Income tax. Can you clear which one of the following is correct:

1. One point covered under the guidelines provided to avail the exemption is -

The amount receivable of the employee under the voluntary retirement / voluntary separation scheme should not exceed-

(a) The amount equal to 3 months salary for each completed years of service;
or
(b) The amount equal to salary at the time of retirement * balance months of service left before the date of retirement/ superannuation.

Does this mean if payment made in respect of VRS is in excess of the above limits then no exemption will be available.

2. The normal formula for calculating amount of exemption available in respect of VRS is the least of the following:

 • Amount equivalent to three months salary for each completed year of service.
 • Amount of salary at the time of retirement for the balance period of months of service left before retirement.
 • Amount actually received/receivable.
 • 5.00 lakhs.

If you go by the above mentioned normal formula then even if payment is made in excess of the amount mentioned in (a) and (b), still exemption is available.