The retrenchment compensation received by a workman is exempt from income-tax subject to certain limits. An amount as per section 25F(b) of the Industrial Dispute Act, 1947 or Rs 5,00,000 whichever is lower. In special case any amount received as per any scheme
The scheme of voluntary retirement framed in accordance with Guidelines prescribed (Rule 2BA)and any payment received or receivable (even if received in installments) by an employee at the time of his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of public sector company, a scheme of voluntary separation, is exempt from income-tax to the extent that such amount does not exceed Rs. 5,00,000/-
Once the exemption is allowed under this clause in any assessment year, the same shall not be allowed in any other assessment year
From A.Y. 2010-11 if the assessee has been allowed relief u/s 89 for such payment in any assessment year, the exemption shall not be allowed under this clause.
Sum received under a Life Insurance Policy including the sum allocated by way of bonus on such policy other than the following is exempt under section 10(10D):
However, any sum received under such policy referred to in (3), (4) and (5) above, on the death of a person would be exempt.