Date: 21 st June 2026
To: Fast Value Global (BD) Ltd.
Subject: Tax Treatment of Termination Compensation, Provident Fund, and Employment-Related
Benefits under Income Tax Act, 2023 / Sixth Schedule.
1. Legal Characterization under Section 32 (Income from Employment)
Under Section 32 of the Income Tax Act, 2023, any compensation received due to termination of
employment — by whatever name it is called —is expressly included within the scope of “salary or wages”.
Further, the definition of “receipt in lieu of or in addition to salary or wages” also covers:
• Termination compensation
• Benefits arising from change in employment terms
• Benefits received at joining or during employment
• Residual employment-related payments (excluding specific fund contributions)
Therefore, any severance pay, golden handshake, or similar termination benefit is legally treated as
employment income (salary income).
2. Treatment of Perquisites
Under the definition of “perquisite”, any benefit or incentive provided by the employer is taxable as
employment income, except specifically excluded items such as:
• Basic salary, arrears, advance salary
• Festival allowance
• Leave encashment
• Overtime
• Employer/employee contributions to approved provident or pension funds
Accordingly, any non-excluded benefit linked to employment is taxable.
3. Sixth Schedule Exemption Analysis
The Sixth Schedule of the Income Tax Act, 2023 provides exemptions for certain retirement-related
benefits, including:
(a) Government Pension Fund
• Pension received from Government Pension Fund → Exempt
(b) Government Gratuity Fund
• Gratuity up to BDT 2.5 crore → Exempt, subject to conditions
(c) Recognized / Approved Funds
• Contributions and income from:
o Recognized Provident Fund
o Approved Superannuation Fund
o Approved Pension Fund
o Approved Provident Fund
→ Exempt only when the fund is approved/recognized by NBR
(d) Provident Fund Act, 1925
• Income from such recognized provident funds → Exempt
4. Critical Compliance Position in the Present Case
Based on the facts provided:
• The employer does not maintain an NBR-approved/recognized gratuity fund
• Therefore, any gratuity/termination payment is:
o Not eligible for exemption under Sixth Schedule (Clause 5)
• Similarly, any provident or retirement benefit outside approved structure:
o Cannot qualify for tax exemption
5. Final Tax Position (TCF Opinion)
On the basis of the above legal framework:
1. Termination compensation (Section 32)
→ Fully taxable as salary income
2. Gratuity/retirement benefit (without NBR-approved fund)
→ Not exempt under Sixth Schedule
→ Fully taxable as salary income
3. Provident fund benefit (if not NBR-recognized)
→ Taxable depending on structure and approval status
6. Conclusion
Tokyo Consulting Firm Limited is of the considered opinion that:
Any compensation received due to termination of employment, along with related employment benefits,
shall be treated as taxable salary income under Section 32 of the Income Tax Act, 2023. Since the employer
does not maintain an NBR-recognized gratuity or approved fund structure, such payments do not qualify
for exemption under the Sixth Schedule and are therefore fully taxable.
Sincerely,
____________
Fumihiro Abe
Director
Tokyo Consulting Firm Limited (TCF)
Disclaimer
This opinion is based solely on the information provided and current interpretation of the Income Tax Act,
2023. It should not be treated as a binding ruling from the National Board of Revenue (NBR). Final tax
treatment may depend on audit assessment and specific factual verification by tax authorities.