The Indian Income tax has provisions for tax exemptions of compensation received at the time of voluntary retirement or separation is exempt from tax if the following conditions are satisfied:

The first and foremost condition is that Compensation should be received on voluntary retirement or separation and received by an employee of the these undertakings;, an authority established under a central, state or provisional Act, local authority, university, an IIT, state government, central government, a notified institute having importance throughout India or any state, notified institutes of management, public sector company, any company or co-operative society.

Further, the compensation should be received in accordance with the scheme of voluntary retirement / separation which is framed in accordance with prescribed guidelines and the maximum exemption amount of Rs. 5 Lacs.

It is important to note that where exemption has been allowed to an employee under section 10(10C) for any assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment year.

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