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Estimate your statutory VRS compensation under Rule 2BA and determine your tax-exempt and taxable portions under Section 10(10C) of the Income Tax Act.
Include Basic Pay and Dearness Allowance only. Exclude HRA, bonus, and allowances.
Estimated Statutory VRS Compensation
Tax-Exempt (Sec 10(10C))
₹5,00,000
Maximum ceiling ₹5,00,000
Taxable VRS Portion
₹40,00,000
Taxed per income slab
Remaining Balance Service
96 Months
8 years 0 months
| Option A: 3 Months' Salary × Completed Years | 3 × ₹75,000 × 20 = ₹45,00,000 |
| Option B: Salary × Balance Remaining Months | ₹75,000 × 96 mos = ₹72,00,000 |
| Statutory VRS Amount (Lower of Option A & Option B) | ₹45,00,000 |
| Tax-Exempt Portion (Section 10(10C) - Max ₹5,00,000) | ₹5,00,000 |
| Taxable VRS Amount (Treated as Profits in lieu of Salary) | ₹40,00,000 |
The Voluntary Retirement Scheme (popularly known as the "Golden Handshake") allows employees in public and private sectors to opt for early separation before their scheduled date of superannuation. The compensation and its tax treatment are strictly regulated under the Indian Income Tax Act.
To be eligible for tax exemption, the scheme must conform to Rule 2BA of the Income Tax Rules, 1962. Under this rule, the maximum compensation cannot exceed the lower of:
Section 10(10C) provides an exemption on VRS compensation up to a maximum statutory limit of ₹5,00,000. Key statutory principles include:
For computing VRS benefits and exemptions, salary consists solely of Basic Pay + Dearness Allowance (DA), provided DA enters into the computation of retirement benefits under your employment terms. Bonus, commission, HRA, and reimbursements are excluded.
Planning for your retirement transition? Explore these complementary tools:
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Under Rule 2BA of the Income Tax Rules, 1962, the compensation payable upon voluntary retirement cannot exceed the lower of two amounts: 1) Three months' salary for each completed year of service, or 2) Salary at the time of retirement multiplied by the balance months of service left before superannuation.
Yes, but under Section 10(10C) of the Income Tax Act, VRS compensation is exempt up to a lifetime statutory ceiling of ₹5,00,000. Any amount received in excess of ₹5,00,000 is considered 'Profits in lieu of salary' and taxed as per your applicable income tax slab.
Yes. While the New Tax Regime disallows most deductions (like Section 80C, 80D, and HRA), terminal retirement benefits including Section 10(10C) VRS exemption (up to ₹5 Lakh), Gratuity under 10(10), and Leave Encashment under 10(10AA) remain fully exempt.
No. The proviso to Section 89(1) of the Income Tax Act explicitly states that an employee who claims exemption under Section 10(10C) cannot claim relief under Section 89 for the same voluntary retirement compensation.
For Rule 2BA and Section 10(10C), 'Salary' includes Basic Pay and Dearness Allowance (DA) if the terms of employment provide for it as part of retirement benefits. Special allowances, HRA, bonuses, and perquisites are generally excluded.
No. The exemption under Section 10(10C) is a once-in-a-lifetime benefit. If you have claimed it in any previous assessment year with any employer, you cannot claim it again.