US-based IT firm Oracle Corporation recently laid off around 12,000 employees in India and nearly 30,000 employees globally. This has once again put the spotlight on severance payouts as well as the tax implications that follow.
The company has about 30,000 employees in India, which includes the ones affected by the recent layoffs. In an email to staff members, the company said it has informed the employees about key organisational changes, adding that "because of these changes, a decision has been taken to streamline the operations, and as a result, unfortunately, the position you currently hold will become redundant," PTI reported.
The agency report added that Oracle is offering 15 days' salary to each employee who has completed a year of service in India, along with one month of unpaid wages till termination date, leave encashment, gratuity based on eligibility and pay for a one-month notice period.
Besides this, the company has offered a two-month salary as a top-up. However, severance packages remain available for those who voluntarily and amicably resign from the company.
Tax On Severance Packages In India
The severance package is treated as "profits in lieu of salary" in India. It gets added to an individual's total earnings for the year and taxed based on their slab. The law remains dependent on the timing of the payout.
If the employee has received the compensation on or before March 31, then this will get taxed under the Income-tax Act, 1961, which classifies severance pay as "profits in lieu of salary" under Section 17(3)(i). However, if the compensation has been received by the employee on or after April 1, in that case, it gets taxed under Section 18(1) of the all-new Income-tax Act, 2025, where it falls within the scope of "profits in lieu of salary".
"The entire amount is added to the employee's total income and taxed at the applicable slab rates, along with surcharge and health and education cess, where applicable," Moneycontrol quoted Alay Razvi, managing partner at Accord Juris, as saying.
Designed as a buffer, severance serves as a temporary cushion, providing employees time to find their next job without facing any immediate financial stress.
Employees who receive large severance payouts are required to evaluate available exemptions and consider relief provisions, which include Section 89 of the Income Tax Act. It allows them to spread the tax burden on lump sum payments across previous years.
A practical approach here is to deploy a portion of the post-tax payout into the tax-efficient instruments.
ALSO READ: Tech Layoffs In 2026: Oracle, Amazon, Block, Meta — These Companies Have Cut Jobs Amid AI Impact
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.