The ITAT Pune has ruled that ex-gratia compensation received under the BSNL Voluntary Retirement Scheme 2019 is exempt from tax under Section 10(10B) of the Income Tax Act, recognizing it as retrenchment compensation.
ITAT Allows Section 10(10B) Exemption on BSNL VRS Compensation
The Pune bench of the Income Tax Appellate Tribunal (ITAT) has allowed a full exemption on ex-gratia compensation received by employees under the BSNL Voluntary Retirement Scheme (VRS) 2019, qualifying it as retrenchment compensation under Section 10(10B) of the Income Tax Act.
The Tribunal found that the intent behind the VRS is to facilitate a voluntary exit for employees, which aligns with the elements of retrenchment compensation as delineated in the Income Tax Act. By affirming this exemption, the ITAT has clarified the treatment of VRS payments in taxation.
This ruling is pivotal for tax professionals dealing with compensation issues related to voluntary retirement schemes, as it provides clarity on the tax implications of such payments. Attorneys in this space must ensure that clients availing VRS benefits are afforded the tax protections established by the Tribunal.
Overall, this decision opens the door for similar VRS compensation claims to receive similar tax relief, fostering a favorable environment for voluntary retirement programs.
Citations
- ITAT Pune (2026) ITAT Order
