Got VRS Payout? Section 10(10B) Can Save ₹5L+

If you took voluntary retirement and received a lump sum, a special income tax rule can make that entire payout tax-free — but only if you meet the 'workman' condition and your employer qualifies. Here's what you must know before filing.

Here's what happened: ITAT Hyderabad ruled that compensation paid under BSNL's VRS-2019 scheme qualifies for income tax exemption under Section 10(10B) of the Income Tax Act.. The exemption applies specifically to employees classified as 'workmen' under the Industrial Disputes Act — the assessing officer must verify each individual's status.. This ruling is significant for thousands of BSNL and other PSU employees who took voluntary retirement and may have incorrectly paid tax on their lump sum payouts..

What you should do: Check your employment records to confirm whether your designation at the time of VRS qualifies you as a 'workman' under the Industrial Disputes Act — this is the single most important eligibility condition.. Review your filed ITR to see if VRS compensation was included in taxable income — if so, consult a tax professional about filing a revised return to claim Section 10(10B) exemption and recover TDS.. If your employer deducted TDS on the VRS payout, collect your Form 16 and TDS certificate, then file or revise your ITR before the applicable deadline to claim a refund..

Section 10(10B) has no fixed rupee ceiling for public sector workmen — unlike the ₹5 lakh cap under Section 10(10C) for non-workmen PSU staff. Getting your designation classification right can save lakhs.

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