BSNL/MTNL VRS Payout: Is Your ₹5L Tax-Free?

CBDT confirmed that ex-gratia payments to BSNL and MTNL VRS-2019 retirees are covered under Section 10(10C), which means they qualify for tax exemption on voluntary retirement compensation — not the stricter retrenchment rules.

Here's what happened: CBDT officially clarified that ex-gratia payments to BSNL and MTNL employees under VRS-2019 qualify as voluntary retirement compensation under Section 10(10C) of the Income Tax Act.. This classification matters because Section 10(10C) allows a tax exemption of up to ₹5 lakh on VRS payouts, with specific eligibility conditions tied to years of service and salary.. The ruling removes ambiguity about whether these payments were retrenchment compensation (Section 10(10B)) — a different provision with different exemption logic — giving retirees a clearer tax position..

What you should do: Check your VRS payout letter and Form 16 to confirm whether Section 10(10C) exemption was applied — if it wasn't, you may have paid excess tax.. Calculate your taxable VRS income: subtract ₹5 lakh (or the prescribed formula amount, whichever is lower) from your total ex-gratia payout to find what actually attracts income tax.. If you received your VRS payout in FY 2023-24 or later and the exemption was missed, consult a tax professional about filing a revised or updated ITR to claim the refund..

The ₹5 lakh Section 10(10C) exemption is a lifetime limit — if you have already claimed it at a previous employer, you cannot claim it again for the BSNL/MTNL VRS payout.

For readers weighing their credit and loan options, our personal loan guide and CIBIL score resources put this update in context.