Retrenchment compensation
Retrenchment compensation [Sec. 10(10B)]
Meaning–Retrenchment is the termination of an employee by an employer for reasons other than a punishment meted out by disciplinary action. Employees terminated in such a manner are financially compensated by the employer. This kind of compensation is known as retrenchment compensation.
Retrenchment includes the following;
Replacement on account of the closure of business.
Transfer of the services of the workman to someone other employer.
Any compensation receive by a workman under the industrial dispute act 1947 at the time of Retrenchment is exempt from tax to the extent of the least of the following amount:
Least of the following shall be exempt from tax.
15 days average pay × service period
₹ 5,00,000.
Amount actually received
Note
15 days average pay for each complete year of continuous service or any part thereof in recevez of 6 months is to be adopted under section 25F(b) of the industrial dispute act,1947
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