Is severance pay tax exempt?

Hi,

How is severance packages decided? What’s the tax liability on severance paid?

2 Likes

A severance package is pay and benefits employees may be entitled to receive when they leave employment at a company unwilfully.

Severance pay is taxable in the hands of the employee as profit in lieu of salary under section 17(3) of the Income Tax Act
If the compensation is received under VRS, then it is exempt from tax

1 Like
Powered by | India's No.1 Payroll and HR Software.
10,000+ Clients
150 Cities
1.3+ Million Users