Voluntary Retirement Scheme (VRS)

Tax Glossary Definition

Voluntary Retirement Scheme (VRS)

A program introduced by employers to allow employees to retire before the standard retirement age, usually accompanied by compensation or ex gratia payments. Under Section 10(10C) of the Income Tax Act, the amount received through a VRS is exempt up to ₹5 lakh, subject to specified eligibility conditions and procedural requirements.

Example: If an employee opts for voluntary retirement and receives ₹5 lakh as compensation, the amount is fully exempt from tax provided all conditions under Section 10(10C) are fulfilled.

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