A VRS calculator for India: compensation and the ₹5 lakh exemption
This VRS calculator for India estimates the compensation you would get under a voluntary retirement scheme and how much of it is tax-free. Enter your monthly basic pay plus DA, completed service, age and retirement age, then pick the formula your employer’s scheme uses: the common three months’ salary for each completed year, or salary for the months left, whichever is less; the Gujarat pattern used by central public sector enterprises; a number of days per year; or simply the amount offered.
It then applies the income-tax rules: the deduction of up to ₹5,00,000 under section 19 (Table Sl. No. 12) of the Income-tax Act, 2025 — the provision that replaced section 10(10C) from 1 April 2026 — and the scheme conditions in Rule 20 of the Income-tax Rules, 2026, which replaced Rule 2BA. It works for PSU, bank and private-sector employees and runs in your browser. It is an estimate: the employer’s scheme decides the actual amount.
How to use the VRS Calculator (India)
- Enter your last drawn monthly salary (basic pay plus dearness allowance only).
- Enter your completed service and your age in years and months, and your superannuation age.
- Choose the compensation formula from your scheme document — or enter the amount offered.
- Tick any condition that applies: pro-rata part years, a public sector separation scheme, being a director, an earlier VRS claim or section 157 relief.
- Read the compensation, the tax-free and taxable parts, and the conditions check; copy the summary.
VRS Calculator (India) features
Four scheme formulas
Months per year, the CPSE Gujarat pattern, days per year, or the offered amount.
Months-left cap
Compensation never exceeds the salary for the months left until superannuation.
Rule 20 ceiling
The income-tax limit of 3 months per completed year or the months left, whichever is lower.
₹5 lakh deduction
Tax-free and taxable parts for tax year 2026-27 or FY 2025-26.
Conditions checklist
Age 40 or 10 years’ service, directors excluded, once in a lifetime, no section 157 relief.
VRS compensation formulas
Common rule: compensation = the lower of 3 × completed years × monthly salary and months of service left × monthly salary. With ₹80,000 a month, 25 completed years and 8 years (96 months) left, that is the lower of ₹60,00,000 and ₹76,80,000 — ₹60,00,000. Some schemes use 1.5 or 2 months instead of 3; change the figure.
Gujarat pattern (CPSEs): 35 days’ salary for every completed year of service plus 25 days’ salary for every year of service left, at 30 days to the month, with a minimum of ₹25,000 or 250 days’ salary, and never more than the salary for the months left. The Department of Public Enterprises’ example — ₹9,500 a month, 32 years served, 3 left — is restricted to 36 × ₹9,500 = ₹3,42,000.
| Item | Rule |
|---|---|
| Deduction | Lower of compensation received and ₹5,00,000 |
| Section (from 1 April 2026) | Income-tax Act, 2025, s.19, Table Sl. No. 12 (was s.10(10C)) |
| Scheme conditions | Income-tax Rules, 2026, Rule 20 (was Rule 2BA) |
| Eligible employees | 10 years’ service or age 40 (not for PSU separation schemes); directors excluded |
| Amount ceiling | Lower of 3 months’ salary × completed years and salary × months left |
| Limits | Once in a lifetime; not if section 157 (ex-89) relief is claimed |
Tax on VRS compensation
The part above ₹5,00,000 is taxed as salary in the year you receive it. Instead of the deduction you may claim relief under section 157 (formerly section 89) to spread the tax as if the amount had been received over earlier years — but not both. The scheme must also reduce the overall staff strength, leave the vacancy unfilled and not re-employ you in a concern under the same management; your employer usually confirms this. Under the 1961 Act the exemption applied in both the old and new regimes — check the current return form for your choice of regime. To estimate the tax on the taxable part, add it to your salary in the income tax calculator; to find other new section numbers, use the Income-tax Act 2025 section mapping.
VRS Calculator (India) FAQ
How is VRS compensation calculated?
Most schemes pay three months’ salary (basic + DA) for each completed year of service or the salary for the months left until retirement, whichever is less. CPSEs may use the Gujarat pattern of 35 days per year served plus 25 days per year left. Your scheme document has the exact formula.
Is VRS compensation tax-free?
Up to ₹5,00,000 is deductible once in a lifetime if the scheme meets the income-tax conditions; anything above that is taxable as salary.
What is the new section for 10(10C) in the Income-tax Act 2025?
Section 19, Table Sl. No. 12, from tax year 2026-27. Rule 2BA is replaced by Rule 20 of the Income-tax Rules, 2026.
Can private-sector employees use this VRS calculator?
Yes. Company employees qualify for the deduction if the scheme meets the conditions; choose the formula your employer uses or enter the amount offered.
Is the VRS calculator for PSU employees different?
PSUs often follow DPE guidelines such as the Gujarat pattern, and for a public sector voluntary separation scheme the 10-year / age-40 condition does not apply — tick that box.
Are gratuity and leave encashment included?
No. They are separate payments with their own limits — use the gratuity calculator for gratuity.