Compensation received under a Voluntary Retirement Scheme (VRS) — commonly called a "Golden Handshake" — is exempt from tax under Section 10(10C), subject to conditions. The scheme must be approved and in accordance with guidelines prescribed by the Central Government.
Eligibility
- Employee of a public sector company, government establishment, or any company/co-operative society
- Must have completed 10 years of service or attained 40 years of age
- The VRS scheme must result in overall reduction in workforce
- The vacancy caused by VRS should not be filled up
- Not applicable if the employee is re-employed in the same organisation or associated company
Exemption Details
- Exempt up to ₹5,00,000 or actual amount, whichever is lower
- Cannot be claimed if the employee has already claimed exemption under any other provision for the same year
- Available only once — not available in subsequent years if VRS compensation is paid in instalments
This guide reflects FY 2025-26 (AY 2026-27) and is for general information. Tax rules and limits change, and how they apply depends on your circumstances. It is not professional tax advice; consult a qualified Chartered Accountant before acting.
