VRS Exemption (section 10(10C))
The tax-free part of voluntary-retirement compensation — exempt up to ₹5,00,000 under section 10(10C).
Switch calculator — current: VRS exemption
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The exemption needs an eligible employer (public sector, authority, university, IIT, etc.).
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For guidance only — not tax advice. Every figure is drawn from BharatX’s verified rule book, with the sections and rules shown alongside it.
VRS exemption: how it works and FAQs
FY 2025-26 (Income-tax Act 1961) and FY 2026-27 (Income-tax Act 2025) · Updated
How it works
Compensation you receive under an approved Voluntary Retirement Scheme (VRS) is tax-free up to ₹5,00,000 under section 10(10C).
Compensation you receive under an approved Voluntary Retirement Scheme (VRS) is tax-free up to ₹5,00,000 under section 10(10C). This works only when your employer is an eligible type and the money is received in accordance with the scheme; otherwise the whole amount is taxable.
- If the employer is not eligible, or the compensation is not received as per the scheme: exemption = 0 (whole amount taxable).
- Otherwise: exemption = min(compensation, ₹5,00,000).
- Taxable = compensation − exemption.
Worked example
Exempt ₹5,00,000; taxable ₹3,00,000.
You receive ₹8,00,000 under an eligible employer’s approved VRS.
- Exemption = min(8,00,000, 5,00,000) = ₹5,00,000.
- Taxable = 8,00,000 − 5,00,000.
Exempt ₹5,00,000; taxable ₹3,00,000.
Frequently asked questions
How much VRS money is tax-free?
Up to ₹5,00,000, provided the employer is eligible and the scheme conditions are met.
Can I claim this more than once?
No. The section 10(10C) exemption can be claimed only once in a lifetime.
Every figure the calculator shows lists the sections it relies on under “Legal basis”. For guidance only — not tax advice.