Friends,
I have been laid -off. I am looking for people in similar situation, to learn about the tax treatment that will be applicable to the severance pay, if any? Will there be TDS or the employee have to take care of the tax on their own ? Are there any specific treatment of severance pay, different from that of normal salary ?
Your inputs will help me plan my finances wisely for my family, till my next job.
Never heard of a government that didn't tax everything it could.
As the country is losing lots of jobs, severance pay was last year made taxable. By a special amendment / classification to the law. So all earlier precedences lose value in the light of the new law.
"If you can't prevent it, profit from it" is the motto.
I found one similar article related to this where they mentioned it's all case to case basis. Basically you'll need to fight for your rights everywhere :-(
https://economictimes.indiatimes.com/news/economy/policy/sacked-staff-to-now-pay-tax-on-compensation/articleshow/62761330.cms
Unfortunately severance will be taxed as per normal tax rates. Last year income tax laws in India were changed in this regard. A Google search would help you to know more details. Sorry but that's what the fact is.
OP,
I faced a similar situation a while ago. The company will deduct TDS on the severance, as was in my case. I filed an appeal for refund of excess TDS on the grounds that Severance it a one time capital receipt and it is not to be considered as pay for services or labor rendered. The Indian Tax Laws allows companies tax exemption on capital receipts , which severance pay is supposed to be considered.
My case went on for 4 years. You can cite similar cases where people have got TDS exemption on severance. A familiar case recently was that of a celebrity (Sushmita Sen ? or so I think), who did manage to get tax exemption. You can google and find examples of similar nature where people managed to get refund /tax exemption.
I suggest that when you submit your returns , you should claim refund for the excess TDS. YOu'll get a hearing and a chance to put forth your case.
Is there a possibility of saving any tax , as the fin year has just begun?
My friend, Oracle will deduct TDS. It depends of how much your severance package would be. If its under 5L no TDS, If its under 10L then 20%, if Its above 10L then 30%. You will be getting form 16 for last year(2018 april - 2019 march) as well as this year(2019 april) too in few months. You have to check the dates with the HR email address given in your severance letter copy. The Gratuity will have no TDS up to 20L.
You get 1 month time to try find a job in other teams before the final settlement kicks in. If you return back within 1 year, you need to pay back full severance package back.
Take a break, Go to a mini-vacation before you start handing out your resume. Vacation will charge you up and you will be ready for the next challenge. Don't worry too much. This too will pass.
A fellow affectee here.
Oracle will deduct TDS as per laws and issue you form 16. Again you have to club this income as normal income, gratuity has different tax treatment.
Just like regular income