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 Retrenchment Compensation

Retrenchment Compensation [Section 10(10B)]

Retrenchment means cancellation of contract of service by employer. Any compensation received by a worker at the time of retrenchment is exempted to the extent of minimum of the following:

  • An amount calculated in accordance with the provisions of Sec. 25F(b) of Industrial Dispute Act. (Under the said Act a workman is entitled to retrenchment compensation equivalent to 15 days' average pay, for every completed year of service or any part thereof in excess of 6 months);

  • Rs.500000; or

  • Actual Amount received. 


  • In case, where the compensation is paid under any scheme approved by the Central Government nothing shall be taxable.

  • Compensation received by a workman at the time of closing down of the undertaking in which he is employed is treated as compensation received at the time of his retrenchment.