Archive · 21 Jul 2026
Pune ITAT rules VRS payment non-taxable in ₹65.21 lakh case
A former Pfizer employee in India received ₹65.21 lakh under a voluntary retirement scheme.
He initially reported it as salary in his tax return but later argued it was a non-taxable payment.
The tax authorities disagreed and wanted to tax it as income.
The court looked at the scheme details and previous similar cases.
They agreed with the employee, saying the payment was not taxable because it was for voluntary retirement, not termination.
The court told the tax officers to correct their assessment.
The Pune bench of the Income Tax Appellate Tribunal (ITAT) ruled that a ₹65.21 lakh payment received under a voluntary retirement scheme (VRS) is a non-taxable capital receipt.
The employee initially reported the amount as advance salary but later argued it was compensation under a VRS.
The tribunal agreed that the payment was not connected to termination of employment and thus not taxable.
The tribunal noted that similar payments to other Pfizer employees had been accepted as non-taxable in previous cases.
The ITAT set aside the appellate order and directed the Assessing Officer to modify the assessment accordingly.
- Who
- Prakash Sukhdeo Sonawane, a former Pfizer Healthcare India employee
- What
- The Income Tax Appellate Tribunal (ITAT) ruled that a ₹65.21 lakh payment received under a voluntary retirement scheme (VRS) is a non-taxable capital receipt.
- When
- The payment was received during FY2018-19, and the tribunal's decision was made on June 8, 2026.
- Where
- The case was heard by the Pune bench of the Income Tax Appellate Tribunal (ITAT).
- Why
- The payment was received under a voluntary retirement scheme following the closure of Pfizer's Aurangabad manufacturing unit and was not connected to termination of employment.
Tax Authorities
Employee
Nature of Payment
Tax Authorities
The payment should be taxed as 'Income from Other Sources' under Section 56(2)(xi) as it was received in connection with termination of employment.
Employee
The payment was not salary but compensation received under a voluntary retirement scheme, constituting a non-taxable capital receipt.
- Amount Received
- ₹65.21 lakh
- Year of Payment
- FY2018-19
- Assessment Year
- AY2019-20
- Company
- Pfizer Healthcare India Private Limited
- Scheme
- Finance Scheme for Employees at Aurangabad, 2019
- Tribunal Decision Date
- June 8, 2026