A Voluntary Retirement Scheme (VRS) package can look attractive on paper, especially when an employer offers a large lump-sum payment to employees willing to leave early. But the amount mentioned in the offer letter is not necessarily the amount you will actually receive after tax.
Remember, severance pay received as VRS is fully exempted from taxation since it is considered a capital receipt. So check the terms and conditions of your employer’s VRS scheme to determine if it is a capital receipt or not. For example, the VRS received due to the closure of your employer’s factory is a capital receipt and not taxed.
