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Instrucions for calculation of Arrears for employees and retirees (who retired after 1.11.2012)


The matter was considered by the Calcutta High Court in writ petition in 4957/W/2004.
The court felt that, prima facie, money received on account of voluntary retirement up to Rs 5 lakh was not taxable. Neither the opinion of the chartered accountants nor the views of the RBI will finally determine the fate of exemption claimed under Section 10(10C).

According to the court, the scheme fulfilled the requirements of Section 2BA and exemption was available up to Rs 5 lakh. The employee is also eligible to claim simultaneous benefit under Section 10(10C) as well as relief under Section 89 for arrears of salary. Emphasis is on amount receivable and not on the manner, method or mode of payment. All that is required is that the limit prescribed should be adhered to in granting exemption. Terminal benefits cannot be brought within the scope of “amount received” under Section 10(10C).

The interpretation placed on the RBI’s OERS has been uniformly accepted by all the Benches of the Income-Tax Appellate Tribunal (ITAT) in India. No decision has been brought on record to deny exemption.

The analysis of Section 10(10C) of the Act and Rule 2BA of the I-T Rules contained in the detailed order of the Three Member Bench of the ITAT (in 302 ITR AT 49 Lucknow), will be of immense value not merely to the RBI employees but also to employees in other organisations claiming the benefit of exemption for VRS compensation up to Rs 5 lakh