## Voluntary Retirement Receipts [Section 10(10C)]

### Eligible undertakings

Employees of the following are eligible:

Central Govt, State Govt or local authority
All companies, statutory corporations and authorities
Co-operative societies
Universities established/incorporated under a Central, State or Provincial Act (including IITs and IIMs)

### Conditions for exemption

Compensation must be received at the time of voluntary retirement or termination as per a VR Scheme.
Exemption applies even if compensation is received in instalments.

### Guidelines

Generally available to employees who have completed 10 years of service OR are 40 years of age.
This 10-year/40-year requirement does not apply to employees of public sector companies under voluntary separation schemes.

### Exemption limit — lower of

1. 3 months' Salary for each completed year of service

2. Salary at retirement × remaining months of service before retirement/superannuation

3. Statutory limit of ₹5,00,000

4. Actual amount received

Salary = Basic + D.A. (forming part of retirement benefits) + Commission (% of turnover).

### Restrictions

The exemption is one-time during the lifetime of the assessee.
No exemption if relief under Section 89 has been allowed in any assessment year in respect of voluntary retirement.
Available irrespective of the tax regime.

⚠️ Common exam mistakes

Allowing the exemption more than once in a lifetime.
Granting both the Section 10(10C) exemption and Section 89 relief for the same VRS amount — they are mutually exclusive.
Applying the 10-year/40-year service condition to public sector company voluntary separation schemes where it does not apply.
Denying exemption merely because the compensation is paid in instalments.
Using the wrong salary base (omitting turnover commission or retirement-benefit DA).

Bare-Act text Section 10(10C) · Income-tax Act, 1961 · click to expand

Any amount received or receivable by an employee of specified undertakings on his voluntary retirement or termination under a scheme of voluntary retirement (or voluntary separation, in the case of a public sector company) is exempt, subject to such guidelines as may be prescribed, to the extent it does not exceed Rs. 5,00,000. Where exemption has been allowed in any assessment year, no exemption shall be allowed in any other assessment year; and where relief under section 89 has been allowed, no exemption under this clause shall be allowed.

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