Tax Implication on Severance Pay (30% bracket)

POSTED BY Gaurav Doshi ON September 17, 2013 4:04 pm COMMENTS (3)

Hello all,

One of my cousin’s company is downsizing and he will be laid off in Sep’13. His company is compesating the job loss with a Severance Package of 6 months i.e. he will be getting 6 months of his salary as a compensation. But we are worried about is huge tax impact on the lump sum pay. My cousin comes in 30% tax bracket.

If anybody has any advice or some experiences please share.

Thanks, Gaurav

3 replies on this article “Tax Implication on Severance Pay (30% bracket)”

  1. CA Karan Batra says:

    Is the computation of the amt to be paid stated under any Law ???

    If yes, maybe you can make use of Section 10(10B) i.e. Retrenchment Compensation… It depends on the fact of the case and it wld be difficult for me to guide without knowing the facts of the case…

  2. ashalanshu says:

    Dear Gaurav, he like it or not but your cousin w’d has to pay the Tax. The only option is to ask the company to pay the amount after 31st March 2014. In next FY. 🙂

    thanks

    Ashal

  3. I dont think there is any seperate rules for this kind of severance pay . If he gets it, its his income for this year and he has to pay tax on this.

    In my knowledge there is nothing extraordinary he can do !

    Manish

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