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Unit 4: Exemptions and Deductions - I

Notes

Notes The payment of gratuity by the Life Insurance Corporation of India under the Staff
Regulations is wholly exempt from tax under Section 10(10), as the object and purpose of
the gratuity scheme of the Life Insurance Corporation of India and the Revised Pension
Rules of the Central Government are the same.
13. Retrenchment compensation [section 10(10b)]: Any compensation received by a workman
under the Industrial Disputes Act, 1947 or under any other Act or rules, orders or
notifications issued thereunder or under any standing orders or under any award, contract
of service or otherwise, at the time of his retrenchment. The amount is exempt under this
clause to the extent of least of the following limits:
(a) Actual amount received.

(b) Amount specified by Central Government i.e. ` 5,00,000.
(c) An amount calculated in accordance with the provisions of clause (b) of Section 25F
of the Industrial Disputes Act, 1947 i.e. 15 day’s average pay for every completed
years of services or part thereof in excess of 6 months.

!

Caution It may be noted that the above provision shall not apply in respect of any
compensation received by a workman in accordance with any scheme which the Central
Government may, having regard to the need for extending special protection to the
workmen in the undertaking to which such scheme applies and, other relevant
circumstances, approve in this behalf and the entire amount of compensation so received
shall be exempt.

Did u know? Where retrenchment compensation received by a workman exceeds the
amount which qualifies for exemption under the new clause, he will be entitled to relief
under section 89 read with rule 21A of the Income Tax Rules, in respect of such excess.
14. Compensation received by victims of Bhopal gas leak disaster [Section 10(10bb)]: According
to the clause any compensation received by victims of Bhopal Gas Leak Disaster under the
Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 and any scheme framed
thereunder is exempt from tax. This exemption of compensation received, however, would
not be available to any assessee in connection with the Bhopal Gas Leak Disaster of an
expenditure which has been incurred and allowed as a deduction from taxable income.
15. Payment received on voluntary retirement [section 10(10c)]: The amended provision
provides for exemption of any amount received or receivable by an employee of a public
sector company or of any other company or an authority established under Central, State
or Provincial Act or a local authority, or any State Government or Central Government or
the Institution having importance throughout India or a recognised management institute,
on his voluntary retirement or termination of his service, in accordance with any scheme
or schemes of voluntary retirement or in the case of a public sector company, a scheme of
voluntary separation. The scheme of voluntary retirement is to be framed in accordance
with such guidelines as may be prescribed which may include among other things the
criteria of economic viability. The amount of exemption is the actual amount of
compensation or ` 5,00,000, whichever is less. This exemption is available only once in the
life time of an assessee.

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