RetirementFinancial Glossary
VRS (Voluntary Retirement Scheme)
Definition
A scheme offered by employers allowing employees to retire before the normal retirement age, usually with a compensation package. VRS compensation is typically calculated as 3-6 months' salary per year of remaining service. The first Rs 5 lakh of VRS compensation is tax-exempt under Section 10(10C).
Why It Matters
VRS is common in PSUs and large companies undergoing restructuring. If offered VRS, calculate the present value of the compensation against what you would earn by continuing to work. Also factor in the impact on pension (if applicable), EPF, and gratuity. For many employees close to retirement, VRS can be financially attractive.