Archive · 28 Aug 2026
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.
- When
- The scheme was approved on 23 October 2019; the tax dispute concerned Assessment Years 2020-21 and 2021-22.
- Where
- The ruling was issued by the Chennai bench of the Income Tax Appellate Tribunal.
- 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.
- 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)