Procedure for purposes of section 19 [Table: Sl. No. 12] relating to voluntary retirement or voluntary separation

Rule 20 of the Income-tax Rules, 2026 deals with procedure for purposes of section 19 [Table: Sl. No. 12] relating to voluntary retirement or voluntary separation. Subject to the conditions specified in sub-rules (2) and (3), the amount received at the time of voluntary retirement or voluntary separation can be claimed as deduction for the purposes of section [Table: Sl. The Act came into force on 01 Apr 2026.

(1) Subject to the conditions specified in sub-rules (2) and (3), the amount received at the time of voluntary retirement or voluntary separation can be claimed as deduction for the purposes of section 19 [Table: Sl. No. 12] by an employee of— (i) a public sector company; or (ii) any other company; or (iii) an authority established under a Central Act or State Act or Provincial Act; or (iv) a local authority; or (v) a co-operative society; or (vi) a University established or incorporated by or under a Central Act or State Act or Provincial Act, and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or (vii) an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961); or (viii) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette, specify in this behalf; or (ix) such other institute of management as the Central Government may, by notification, specify in this behalf.

(2) The deduction under sub-rule (1) is allowable only if the scheme of voluntary retirement framed by the aforesaid company or authority or co-operative society or University or institute, as the case may be, or if the scheme of voluntary separation framed by a public sector company, (herein referred to as 'the scheme') is in accordance with the following requirements:— (i) the scheme applies to an employee who has completed ten years of service or completed forty years of age; (ii) the scheme applies to all employees (by whatever name called) including workers and executives of a company or of an authority or of a co-operative society, as the case may be, excepting directors of a company or of a co-operative society; (iii) the scheme has been drawn to result in overall reduction in the existing strength of the employees; (iv) the vacancy caused by the voluntary retirement or voluntary separation is not to be filled up; (v) the retiring employee of a company shall not be employed in another company or concern belonging to the same management; and (vi) the amount receivable on account of voluntary retirement or voluntary separation of the employee does not exceed either A or B, where,— A = 3 × N × S; B = M × S; and N = Number of completed years of service; M = balance months of service left before the date of his retirement on superannuation; S = salary at the time of retirement.

(3) In case an amount is received by an employee of a public sector company under the scheme of voluntary separation framed by such public sector company, the requirement of sub-rule (2)(i) shall not be applicable.

(4) In this rule, the expression "salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

Rule 20, The Income-tax Rules, 2026.