Income under the head of Salaries :

Compensation received at the time of voluntary retirement [Section 10 (10C) ]of the Income Tax Act

• Compensation received at the time of voluntary retirement is exempt from tax on fulfilling certain laid down conditions The guideline for this section have been laid down in Rule 2BA and the same are as under
• The employee availing voluntary retirement should have completed 10 years of service or completed 40 years of age.
• The voluntary retirement scheme should apply to all employees including workers and executives, except the directors of a company.
• The scheme of voluntary retirement should be drawn to result in overall reduction in the existing strength of the employees.
• The vacnacy caused by voluntary retirement is not filled up and the retiring employee is not employed in another company or concern belonging to the same management.
• The amount of voluntary retirement of the employee should not exceed the amount equivalent to three months salary for each completed year of service or monthly emoluments at the time of retirement by the balance months of service left at the time of his retirement.
• In the case of a public sector company the voluntary retirement scheme should be framed as per the prescribed guidelines as mentioned above.
• In the case of any other company the voluntary retirement scheme should be framed as per the prescribed guidelines and such schemes must be approved by the Chief Commissioner. The maximum amount of exemption available to the employees under the voluntary retirement scheme is limited to Rs. 5,00,000/-. (Rs. Five Hundred Thousand )
• When an employee has availed an exemption on account of compensation received u/s 10(10C) for any assessment year no other exemption shall be allowed to him in relation to any other assessment year.