THE BYSTANDER

You worked part of FY 2025-26, got laid off, maybe withdrew some EPF, maybe did a little freelancing while job hunting. Now the ITR deadline is approaching and your situation fits none of the standard guides — they all assume twelve tidy months of salary. This one doesn't. Here's how to file when your year broke in the middle, and why doing it carefully usually ends in a refund. The good news first: you probably overpaid tax Your employer deducted TDS every month assuming you'd earn that salary for the full year . You didn't. Your actual total income is lower than what the TDS was calibrated for — which means, for most people laid off mid-year, the government owes you money , not the other way around. But the refund isn't automatic. You get it only by filing the return, and only by filing it correctly. That's the whole reason to read on. And with the new regime's Section 87A rebate making income up to ₹12 lakh effectively tax-free this year (₹12.75 lak...

Getting laid off is hard enough. Then the severance lands in your account — 3, 4, 6 months of pay in one lump sum — and a big chunk vanishes as TDS. Most people accept this as unavoidable. It often isn't. Indian tax law has specific reliefs for retrenchment compensation and lump-sum payouts that neither your employer's payroll team nor the ITR portal will apply for you automatically. This guide explains each one in plain language, for AY 2026-27. First, understand what your "severance" actually contains Your full and final settlement is not one payment — it's several components stapled together, and each one is taxed differently : Retrenchment / severance compensation — the "X months of pay" part. Partially exempt under Section 10(10B), explained below. Notice pay (pay in lieu of notice) — fully taxable as salary. No exemption. Leave encashment — exempt up to ₹25 lakh (for non-government employees, computed per the Section 10(10AA) formula). ...