Man’s VRS Rs 65.21 lakh payout taxed as salary; ITAT Pune says it is capital receipt
The ITAT Pune ruled that a voluntary retirement scheme (VRS) payout received by an employee is a capital receipt rather than taxable salary. This decision provides tax relief to the individual who had initially misreported the funds in his income tax return.
Why it matters
This case clarifies the tax treatment of severance packages for employees undergoing early retirement due to plant closures.
You choose to retire early and get money from your company for the VRS. But you mistakenly report it in a wrong way in your income tax return. What happens then?In one such case a man chose to retire under a voluntary retirement scheme (VRS) following the closure of the manufacturing plant operated by his employer. The manner in which he initially disclosed this amount in his income tax return (ITR), however, led to a prolonged dispute with the Income Tax Department. He eventually won relief at the ITAT level.What the case is aboutThe man had been employed in Aurangabad.
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