Section 35DDA of ITA, 1961 : Section 35Dda: Amortisation Of Expenditure Incurred Under Voluntary Retirement Scheme

Explanation using Example

Imagine a company, XYZ Pvt. Ltd., decides to restructure its operations and reduce its workforce. It introduces a Voluntary Retirement Scheme (VRS) where employees can choose to retire early, and in return, they receive a lump sum payment. Let's say an employee opts for the VRS and is paid an amount of ₹500,000. According to Section 35DDA of the Income-tax Act, 1961, XYZ Pvt. Ltd. can claim a deduction of one-fifth of this amount (₹100,000) in the current financial year when the payment is made. The remaining ₹400,000 can be claimed in equal installments over the next four years (₹100,000 e...

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