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Section 3 Retirement Benefits 1

Section III: Retirement Benefits

Calculate the tax relief yourself

    1. Calculate tax payable on the total income, including additional salary in the year it is received.
    2. Calculate tax payable on the total income, excluding additional salary in the year it is received
    3. Calculate difference between Step 1 and Step 2
    4. Calculate tax payable on the total income of the year to which the arrears relate, excluding arrears
    5. Calculate tax payable on the total income of the year to which the arrears relate, including arrears
    6. Calculate difference between Step 4 and Step 5
    7. Excess of amount at Step 3 over Step 6 is the tax relief that shall be allowed.

Note that if amount at Step 6 is more than amount at Step 3 no relief shall be allowed.

Exemption on receipts at the time of voluntary retirement

Any compensation received upon voluntary retirement or seperation is exempt from tax as per Section 10(10C) when the following conditions are fulfilled

  • Compensation received is towards voluntary retirement or separation
  • Maximum compensation received does not exceed Rs.5,00,000
  • The recipient is an employee of an authority established under the Central or State Act, local authority, university, IIT, state government or central government, notifued institute of management, or notified institute of importance throughout India or any state, PSU, company or cooperative society.
  • The receipts are in compliance with Rule 2BA

No exemption can be claimed under this section for the same AY or any other if relief under Section 89 has been taken by an employee for compensation of voluntary retirement ot seperation or termination of services.

Note: Exemption can only be claimed in the assessment year the compensation is received.

Section III: Retirement Benefits

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