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Income Tax Laws – I

Notes Hence, 2, 43,000, being the least, shall be exempt from tax under Section 10(10AA) of the Act and
the balance 5,32,000 (i.e. 7,75,000 - 2,43,000) shall be taxable for the assessment year 2013–14.

Retrenchment Compensation

Retrenchment compensation received by a workman under the Industrial Disputes Act, 1947 or
any other Act or rules, orders or notifications issued thereunder or under any standing orders or
under any award, contract of service or otherwise to the extent of the actual award or ` 5,00,000
the amount notified by the Central Government or the amount calculated u/s 25F(b) of the
Industrial Disputes Act, 1947 whichever is less.
Amount received from Statutory Provident Fund and/or Public Provident Fund or Recognised
Provident Fund
The amount is exempt if the following conditions are satisfied:
1. he has rendered a continuous service with his employer for five years or more; or

2. if he has not rendered such continuous service, the service has been terminated by reason
of his ill health, or discontinuance or contraction of employer’s business or any other
cause beyond the control of employee; or
3. on cessation of his employment, he obtains employment with any other employer and
balance standing in his Recognised Provident Fund is transferred to his account in the
Recognised Provident Fund maintained by the new employer.

!

Caution Where the accumulated balance of recognised provident fund has been transferred
to any other Recognised Provident Fund [under clause (iii)] then in computing the period
of continuous service for clause (i) or clause (ii), the period or periods for which the
employee rendered continuous service under his former employer or employers shall be
included.
Self Assessment

Fill in the blanks:
25. …………………………….means retirement, premature termination of employment,
termination by death or voluntary resignation.

26. ………………………. is a reward for long and meritorious service.
27. ……………………………….envisages in providing retirement benefit to the workman
who have rendered long and unblemished service to the employer.

28. …………………………………… received by a workman under the Industrial Disputes Act,
1947.

7.8 Deductions Allowed from Salaries (Section 16)

The following amounts shall be deducted in order to arrive at the chargeable income under the
head ‘Salaries’.
1. Standard deduction: Omitted by Financial Act, 2005 w.e.f. 1.4.2006. – Section 16(i)

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