On November 19, 2025, the Income Tax Appellate Tribunal (ITAT) in Hyderabad decided that any severance package an employee receives from their employer after their employment ends, whether in lump sum or otherwise, will be treated as profits in lieu of salary and thus subject to income tax.

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This means that if any terminated employee gets any severance pay, they must include that amount in their income tax return (ITR) unless it qualifies for exemption under Section 10 (VRS and retrenchment compensation).

Background of this judgement The case revolves around Smt Nagendla from Secunderabad, who worked as as Operations Lead with a well-known MNC. On January 10, 2019, she filed her inc

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