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Can laid off employees save tax on their severance pay?

According to the provisions of Rule 21A(1)(c), an individual will be eligible to claim relief under Section 89 in respect of compensation received by him in connection with the termination of his employment.

ET CONTRIBUTORS|
Nov 04, 2019, 11.06 AM IST
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If your severance payout is not as per any qualifying scheme, the entire amount will be taxable.
My company shut down suddenly. I was offered a severance package equal to two years’ CTC. The entire amount is going to be taxed at 30%. Is there any way I can save on this tax?
Homi Mistry Partner, Deloitte Haskins & Sells
replies: Unfortunately, there is no provision that exempts tax on severance payments to employees other than a qualifying voluntary retirement scheme as per Section 10 (10C) of the Income Tax Act (Act), subject to fulfilment of conditions and capped at Rs 5 lakh. If your severance payout is not as per any qualifying scheme, the entire amount will be taxable.

However, you may claim relief under Section 89 of the Act (read with Rule 21A of the Income Tax Rules, 1962). According to the provisions of Rule 21A(1)(c), an individual will be eligible to claim relief under Section 89 in respect of compensation received by him in connection with termination of his employment if the individual has rendered continuous service for three years or more and when the unexpired portion of his term of employment is three years or more.

My wife is a housewife and invests in equity shares and mutual funds with money transferred by me into her account. She has accrued both LTCG and STCG by selling shares and MF units. I wish to show the gains in my income tax return due to clubbing provisions. How can I do that as my ITR will be in reference to my PAN and not hers?
Amit Maheshwari, Partner, Ashok Maheshwary and Associates
replies: As per Section 64 of the Income Tax Act, for any asset transferred to spouse without consideration or inadequate consideration, the income from such asset shall be clubbed with the income of the spouse who transferred such property. In this case, the asset being money, which is further invested in mutual funds, the income from the investments will be clubbed with the income of the husband.

The income has to be disclosed in the Schedule SPI (Income of specified persons) of the income tax return along with the name, PAN head of income and the relationship of the person whose income is being clubbed.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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