Eknath (Jr. Asstt.) 01 August 2013

Compensation recd on svrs

Sir,

My company is offering SVRS for specific categories of employees with a aim to reduce staff and expenditure on staff. Compensation offered is 1.5 salary for every completed year or balaance month salary, whichever is lesser.

As per IT rule, Compensation upto Rs. 5,00,000/- is fully exempted, if the SVRS scheme is as per IT guidelines and main condition is, this scheme should be open to all employees.

As scheme is open for selecteed categories only, my company has decided to deduct TDS. This will result into loss of 50,000 to 1,50,000 Rs. depending upon IT slab.

Our HR Dept. still hold that, as main aim of SVRS scheme is to reduce staff only, we can claim exemption and there is no need to deduct TDS also. But Finance Dept. is not ready to do so.

What i want to know is ,

1) As SVRS scheme's main aim is to reduce staff only, is there any clause that will consider exemption.

2) Is there any chance to get back TDS deducted by filling return ?

Thanks !

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1 Replies

Vallabh Parmar (Advocate) 18 August 2013

The guidelines for the exemption from tax on the Golden Handshake (VRS) are explained underneath.

1. VRS applies to an employee of the company who has completed 10 years of service or 40 years

2. It applies to all employees and executives (excluding directors).

3. It has been drawn to result in overall reduction in the existing strength of the employees of the company.

4. Vacancy caused by the VRS is not to be filled up.

5. The retiring employee is not to be employed in other business belonging to the same management.

6. The amount should not exceed Rs. 5 lacs.

7. The employee has not Availed in the past the benefit of any other voluntary scheme. (see attachment for more details )

As per above guidelines if specific class of employee are covered that means all employees of that category and hence applies to all employees of that categry and hence fulfills the conditions for claiming exemption us 10(10C) of I Tby Act. Thus in my opinion no TDS requires to be made .

There is no specific clause to claim exemption by an individual in his return of inome on ground of reduction of staff.

2) If TDS is made then ITO will definately add back such exemption on above ground however you may get relief in appeal .

3) in my opinion you can explain to your employee that all employee means all employees of that class and hence condition no 2 as mentioned above is FULLY satisfied and no TDS NEEDS TO BE DEDUCTED .