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Laid off? Seek advice before claiming tax exemption on severance pay

You can claim only if the payout is voluntary and you have documentary proof to this effect

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If you have received severance pay, don’t decide on your own whether to pay tax on it or not

Bindisha Sarang Mumbai
A large number of employees have received the pink slip in recent days from big tech companies, start-ups, and so on. Usually, ex-employees receive a severance pay at the time of such layoffs in addition to gratuity, leave encashment, and provident fund. Currently, there is no unanimity among tax experts on whether severance pay is taxable.  

Ankit Jain, partner, Ved Jain & Associates, says, “The taxation of severance pay is still under dispute. Tax authorities and courts have divergent views on the matter.”

View 1: It’s taxable

One set of experts believes severance pay is taxable. Maneet Pal Singh, partner,

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