Employees Laid-Off, Opting For VRS Amid Coronavirus Pandemic Have to Pay Income Tax on Allowances Received
Amid economic slowdown erupted due to coronavirus pandemic, several private firms are laying-off their employees. Companies have offered a voluntary retirement scheme (VRS) to employees who are near to their retirement. Trouble has mounted for these employees as they have to pay income tax on the allowance
Mumbai, June 22: Amid economic slowdown erupted due to coronavirus pandemic, several firms are laying-off their employees. Companies have offered a voluntary retirement scheme (VRS) to employees who were near to their retirement. These companies are giving gratuity and VRS allowance in addition to their salary. Trouble mounted for these employees as they have to pay income tax on the allowance which they will receive after accepting the VRS. Income Tax Return 2019-20 Filing Deadline Extended Till November 30, 2020.
According to section 17(3) of Income Tax, an employee have to pay tax on the received allowances, which are more than three months salary. As per the Income Tax Act, if a person earns money from other sources after being laid off, then also he/she has to pay income tax on the amount earned. However, there some options of rebate under various section of the Income Tax rule.
Section 10(C) of the IT act provides exemption on the amount received (receivable) upto Rs five lakh on voluntary retirement or termination of service by an employee. These exemptions are applicable only once and if he/she was employed in public sector company, local authority, state government undertaking or any other private company. Exemptions can also be availed if an Employer pays an employee under the Industrial Dispute Act.
India on Monday reported 445 deaths and a spike of 14,821 new coronavirus cases in 24 hours. The total positive cases in India increased to 4,25,282, including 1,74,387 active cases. The COVID-19 death toll jumped to 13,699 in the country.
(The above story first appeared on LatestLY on Jun 22, 2020 09:50 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).