5 days ago
Chennai ITAT Grants Full Tax Relief for BSNL VRS
A former BSNL employee received money when she left her job under a special retirement scheme.
At first, she paid tax after claiming only the usual ₹5 lakh exemption.
She later asked for a larger exemption based on earlier court decisions.
The Chennai ITAT agreed with her.
It said BSNL’s scheme was connected to a government-approved plan to revive BSNL and MTNL.
Because the government funded the payments, the tribunal treated them like retrenchment compensation.
This allowed the employee to claim full tax relief under a different section of the tax law.
Experts said other VRS payments may still be taxable depending on the scheme and the law.
The Chennai ITAT granted complete tax exemption to a former BSNL employee who opted for the VRS-2019 Scheme.
She had initially claimed only the ₹5 lakh exemption under Section 10(10C) for Assessment Years 2020-21 and 2021-22.
The tribunal classified the compensation as retrenchment compensation eligible for exemption under Section 10(10B).
BSNL’s VRS-2019 formed part of a Union Cabinet-approved revival package for BSNL and MTNL funded through government budgetary support.
Tax experts cautioned that the ruling does not automatically make compensation from every VRS scheme tax-free.
- Who
- A former woman employee of Bharat Sanchar Nigam Limited, with the case decided by the Chennai bench of the Income Tax Appellate Tribunal.
- What
- The tribunal granted complete tax exemption on compensation received under BSNL’s VRS-2019 Scheme.
- Where
- The ruling was issued by the Chennai bench of the Income Tax Appellate Tribunal.
- When
- The scheme was approved on 23 October 2019; the tax dispute concerned Assessment Years 2020-21 and 2021-22.
- Why
- The tribunal found that the payment had the legal character of retrenchment compensation rather than ordinary voluntary-retirement compensation.
Tribunal’s Full-Exemption Rationale
Experts’ Broader-Application Caution
Character of the payment
Tribunal’s Full-Exemption Rationale
The Chennai ITAT held that BSNL VRS-2019 compensation was, in substance, retrenchment compensation and qualified under Section 10(10B).
Experts’ Broader-Application Caution
Tax experts emphasized that the ruling depended on the specific legal and funding features of BSNL VRS-2019.
Whether VRS payments are tax-free
Tribunal’s Full-Exemption Rationale
The former employee obtained complete relief because the scheme was treated as a government-approved retrenchment mechanism.
Experts’ Broader-Application Caution
Compensation under other VRS schemes will not automatically be tax-free; ordinary VRS payments generally remain subject to the ₹5 lakh Section 10(10C) limit and other conditions.
Key facts
- Employer
- Bharat Sanchar Nigam Limited (BSNL)
- Scheme
- BSNL VRS-2019 Scheme
- Tribunal
- Chennai bench of the Income Tax Appellate Tribunal
- Initial exemption claimed
- ₹5 lakh under Section 10(10C)
- Full exemption provision
- Section 10(10B) of the Income-tax Act
- Cabinet approval
- 23 October 2019
- Related companies
- BSNL and Mahanagar Telephone Nigam Limited (MTNL)
Sources
Related news
VRS Severance: How Much Compensation Is Tax-Free Under New Rules
Pune ITAT Says Pfizer VRS Payout Is Not Taxable
ITAT Allows Retrospective ₹25 Lakh Leave Exemption Relief
ITAT rules in taxpayer's favour on ₹79.25 lakh gratuity deduction
Vizag MP urges steel minister to release pending VRS dues
ITAT rules unexercised ESOP buyback payouts taxable as capital gains
Delhi High Court Rejects Challenge to C-DOT Emergency Alert Deal
Two Die in Nigdi BSNL Duct as Cable Theft Probe
India Notifies IST Rules As Common Official Time Reference
Airtel Narrowly Surpasses Jio in July Subscriber Additions
