Prajna Capital - An Investment Guide

With rising input costs and falling margins, it has become imperative for the company to cut costs and has decided to cut its employee strength by 20% in order to reduce its wage bills. Rather than retrench employees and invite litigation (and the wrath of trade unions), the company has advanced a more humane approach by instituting a voluntary retirement scheme ( VRS ) that is open to all employees. Here are the few things I have asked him to consider while making his decision: 1) NOT A PERMANENT RETIREMENT Although called “retirement”, a VRS does not stop the person from taking up another employment as long as the employment is not with the same company or group. 2) TAX BENEFITS A VRS designed in accordance with Section 10(10C) of the Income-tax Act, 1961 allows the recipient to enjoy tax exemption on his compensation up to a maximum of Rs 5 lakh once in his lifetime. 3) OTHER TERMINAL BENEFITS A VRS ideally should be over and above other terminal payouts auch as Provident Fund, g...

Like your colleagues who throw a warm farewell for you when you leave after putting in substantial years, your employer too has a small, but significant, way of singing 'he's a jolly good fellow' to reward you for your service to the organisation. He does so by giving you a free lump sum of cash - called gratuity in financial parlance - on your exit. The amount that he gives is based on the number of years of service you have put into the organisation. Read on to know more about this little-known windfall and some ideas about what you can do with the free money that comes your way. When are you entitled? Gratuity in earlier days was rather arbitrary and completely hostage to the whims of the employer. A wealthy, well-established employer would reward his dedicated employees and the not so rich would refuse such generosities. This led to a lot of discord and finally the government stepped in, passing the Payment of Gratuity Act, 1972, making it mandatory for all employers wi...