My last employer (early-stage startup) discontinued its business mid-FY and laid off all employees. I was a Software Engineer, a purely technical IC role, with no supervisory duties.
My F&F had two parts: one month’s notice pay, plus a “Severance Pay” component that the separation letter itself calls “statutory payments based on duration of employment — FIFTEEN DAYS” — i.e., the Sec 25F(b) ID Act formula (15 days’ pay per completed year of service). The employer’s Form 16 treats the entire amount as taxable salary with full TDS.
Questions:
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Can I claim exemption u/s 10(10B) on the severance component? My reading: closure of the undertaking = deemed retrenchment (Sec 25FFF), technical software employees are “workmen” (ITAT Bangalore – Texas Instruments; Karnataka HC), and the amount equals the 25F(b) formula, so it’s fully within the exemption limit. Is claiming it in the ITR valid even though Form 16 shows it as taxable?
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How do I claim it in Quicko? The salary exemptions dropdown has HRA/LTA/gratuity/leave encashment, etc., but no 10(10B) and no “other exempt allowance.” The only workaround I see: reduce Basic Salary and disclose the amount under Other Incomes → Exempt Income (Schedule EI) — but then gross salary u/s 17(1) won’t match Form 16/26AS.
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Any practical experience with CPC on 10(10B) claims not reflected in Form 16 — is a 143(1)(a) query the norm, and does responding with the F&F payslip + separation letter resolve it?
Evidence ready: F&F payslip showing the “fifteen days” component, separation letter, both Form 16s.
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