Section 19(1)

The income chargeable under the head “Salaries” shall be computed after making the deductions of sums of the nature mentioned in column B of the following Table,

not exceeding the amount as mentioned in column C thereof: —

Column A – Sl No.

Column B - Nature of Sum

Column C – Amt of Deduction

Nature of Sum [B]

Deduction [C]

Employment tax paid by assessee

as per article 276(2) of the Constitution, leviable by or under any law.

Entire amount

Professional tax or taxes on employment levied by a State under Article 276 of the Constitution is allowed as deduction only when it is actually paid by the employee during the tax year.

Nature of Sum [B]

Amt of Deduction [C]

Standard deduction

(a) Where income-tax is computed u/s 202(1) [New Tax Regime]

₹ 75000 or the salary, whichever is less,

(b) In any other case

₹ 50000 or the salary, whichever is less,

(a) If the assessee is paying tax under new tax regime u/s 202(1), standard deduction shall be lower of

(i) Rs.75,000 or

(ii) Amount of salary,

(b) If the assessee is paying tax under old regime, standard deduction shall be lower of

(i) Rs.50,000 or

(ii) Amount of salary

Nature of Sum [B]

Amt of Deduction [C]

Death-cum-retirement gratuity received as referred to in sub-section (2)(g).

Entire amount

Section 19(2)(g)

Death-cum-retirement gratuity referred to in sub-section (1) (TSN 3) shall be as–

(A) received under the revised pension rules of the CG, or the Central Civil Services (Pension) Rules, 2021; or

(B) received under any similar scheme applicable–

(i) to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said rules);

(ii) to the members of the all-India services;

(iii) to the members of the civil services of a State or holders of civil posts under a State; or

(iv) to the employees of a local authority

Nature of Sum [B]

Amt of Deduction [C]

Payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services.

Entire amount

Nature of Sum [B]

Amt of Deduction [C]

Gratuity received under the Payment of Gratuity Act, 1972

Amount received as restricted to the amount calculated as per the provisions of section 4(2) and (3) of the said Act.

Least of Following amount shall be deducted

(i) 20 lakh

(ii) Actual gratuity received

(iii) 15 days' salary (based on last drawn salary) for every completed year of service or part in excess of 6 months (No. of days in a month to be taken as 26)

Nature of Sum [B]

Amt of Deduction [C]

Any other gratuity received by an employee—

(i) on his retirement; or

(ii) on his becoming incapacitated before such retirement; or

(iii) on termination of his employment.

Amount being minimum of—

(a) actual gratuity received;

(b) amount specified by the CG, by notification, having regard to the limit applicable in this behalf to the employees of the CG; and

(c) half month’s salary for each completed year of service, calculated as under: —

Amount = 1/2*(A x B)

where, —

A = average salary for ten months immediately preceding the month when any such event occurs;

B = number of such completed years.

Section 19(2)(a)

In respect of the entries against SN 6 thereof,

if gratuity or gratuities was or were received from one or more than one employer in the same tax year (whether or not any gratuity or gratuities was or were received in any earlier tax year),

the aggregate amount of deduction shall not exceed—

A – B,

were, —

A = the limit specified by the CG, by notification; and

B = the aggregate amount of gratuity or gratuities which was or were received in any one or more earlier tax years and allowed as an exemption or a deduction (whether whole or part) from the total income of any such tax year or years;

Section 19(2)(b)

in respect of the entries against serial numbers 6 and 14 thereof,

“Salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites;

Nature of Sum [B]

Amt of Deduction [C]

Payment in commutation of pension received—

(a) under the Civil Pensions (Commutation) Rules of the CG; or

(b) under any similar scheme applicable to–

(i) the members of the civil services of the Union or holders of posts connected with defense or of civil posts under the Union, [such members or holders not covered under (a)];

(ii) the members of the all-India services;

(iii) the members of the defence services;

(iv) the members of the civil services of a State, or the holders of civil posts under a State; or

(v) the employees of a local authority or a corporation established by a Central Act or State Act or Provincial Act.

Entire amount

Nature of Sum [B]

Amt of Deduction [C]

Payment in commutation of pension is received under any scheme from any other employer.

The commuted value shall be determined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality, and—

(a) where the employee has received gratuity, the commuted value of one-third of the pension, which he is normally entitled to receive; and

(b) in any other case, the commuted value of one-half of such pension.

Nature of Sum [B]

Amt of Deduction [C]

Payment in commutation of pension received from a fund as specified in Schedule VII (TSN 3).

Entire amount.

Nature of Sum [B]

Amt of Deduction [C]

Compensation received by a workman at the time of his retrenchment—

(a) under the Industrial Disputes Act, 1947; or

(b) under any other Act or rules, orders or notifications issued thereunder; or

(c) under any standing orders; or

(d) under any award, contract of service or otherwise.

Minimum of—

(a) compensation received;

(b) amount calculated as per section 25F(b) of the Industrial Disputes Act, 1947;

i.e., 15 days average pay x completed years of service and part thereof in excess of 6 months

(c) such amount, not being less than ₹50000, as may be notified by CG.

Nature of Sum [B]

Amt of Deduction [C]

In case of compensation referred to in Sl. No. 10, where such compensation received is in accordance with any scheme which the CG may approve in this behalf, having regard to–

(a) the need for extending special protection to the workmen in the undertaking to which such scheme applies; and

(b) other relevant circumstances

Compensation received.

Section 19(2)(c)

In respect of the entries against SN 10 and 11 thereof,

the following amounts shall be deemed to be compensation received at the time of retrenchment: –

(i) compensation received by a workman at the time of the closing down of the undertaking in which he is employed;

(ii) compensation received by a workman, at the time of the transfer (whether by agreement or by operation of law) of the ownership or management of the undertaking in which he is employed, from the employer in relation to that undertaking to a new employer, if—

(A) the service of the workman has been interrupted by such transfer; or

(B) the terms and conditions of service applicable to the workman after such transfer are in any way less favourable to the workman than those applicable to him immediately before such transfer; or

(C) the new employer is, under the terms of such transfer or otherwise, legally not liable to pay to the workman, in the event of his retrenchment or compensation on the basis that his service has been continuous and has not been interrupted by such transfer;

Section 19(2)(d)

in respect of the entries against SN 10 and 11 thereof,

the expressions “employer” and “workman” shall have the same meanings as respectively assigned to them in the Industrial Disputes Act, 1947;

Nature of Sum [B]

Amt of Deduction [C]

Amount received or receivable on voluntary retirement or termination of service

under a scheme or schemes of voluntary retirement,

by an employee as referred to in sub-section (2)(h)

Minimum of—

(a) compensation received; and

(b) ₹ 500000.

Section 19(2)(h) read with Rule 20(1)

Schemes of voluntary retirement or termination of service as referred to in sub-section (1) (TSM 12)

shall be for the employees of–

(i) a public sector company (under a scheme of voluntary separation); 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 u/s 3 of the University Grants Commission Act, 1956; or

(vii) an Indian Institute of Technology within the meaning of section 3(g) of the Institutes of Technology Act, 1961; or

(viii) the Central or any State Government; or

(ix) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification, specify in this behalf; or

(x) such institute of management, as the CG may, by notification, specify in this behalf.

Section 19(2)(e)(i) read with Rule 20(2)

The deduction u/sr (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 10 years of service or completed 40 years of age;

However, this requirement is not applicable in case of an employee of a public sector company under the scheme of voluntary separation framed by the company. [Rule 20(3)]

(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, 

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) vacancy caused by the voluntary retirement or voluntary separation is not to be filled up;

(v) 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, were, –

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.

Section 19(2)(e)

The provisions of the entries against SN 12 thereof

shall be subject to the following conditions: –

(ii) where deduction has been allowed to an employee in respect of the said item for any tax year, no deduction thereunder shall be allowed to him in relation to any other tax year; and

(iii) where any relief u/s 157 has been allowed to an assessee for any tax year in respect of any amount referred to in the said item, such amount shall not be allowed as a deduction from the compensation received or receivable in any tax year;

Rule 20(4)

In this rule, the expression "salary 

includes dearness allowance, if the terms of employment so provide,

but excludes all other allowances and perquisites.

Nature of Sum [B]

Amt of Deduction [C]

Leave Encashment by an employee of the CG or SG as the cash equivalent of the leave salary

in respect of the period of earned leave at his credit

at the time of his retirement whether on superannuation or otherwise.

Entire amount.

Nature of Sum [B]

Amt of Deduction [C]

Leave encashment received by an employee who is not a CG or SG employee.

Amount being minimum of—

(a) the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement, whether on superannuation or otherwise

(entitlement of earned leave shall not exceed 30 days for every year of actual service);

(b) amount “A”,

were, —

A =10×B;

B = average monthly salary for the 10 months immediately preceding his retirement whether on superannuation or otherwise;

(c) [Rs.25,00,000] amount as the CG may, by notification, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government; and

(d) actual payment received.