“Hearing of Visa layoffs, my anger is less on the company but more on a completely non-related entity. It’s the government,” wrote Sheth.
Market Context
Severance pay is money that an employer gives an employee when their job ends, typically due to reasons such as layoffs. The money is meant to help employees financially while they look for a new job.
The Bengaluru-based founder of Kreative Kode pointed out that salaried employees honestly pay tax every month and get no social security. Instead, even their severance pay is taxed by the government.
(Also read: Bengaluru founder vows to move out of India after paying ₹4 crore tax: ‘System is flawed’)
He then highlighted how severance pay, meant to keep families afloat, is treated like a bonus and taxed.
“The severance package you receive is taxed like a bonus. Flat 30%. Imagine, 30% deduction on the money that will pay your children’s school fees, your parents’ medicines, your EMI, your groceries,” he wrote.
The entrepreneur and former employee said that Indian employees do not receive “unemployment benefits or income support.”
Keeping this in mind, he argued that severance pay should not be taxed or treated like ordinary income.
“I understand why companies lay people off because markets change and businesses change. But I struggle to understand why a severance package, whose entire purpose is to help someone survive unemployment, should be treated exactly like ordinary income,” he concluded.
“The bigger issue isn’t just how severance is taxed; it’s that India offers very limited income support for private-sector employees who suddenly lose their jobs,” wrote one person.
“The problem is with the mindset of the people, India is not a welfare state anymore. Salaried middle class are punished heavily because they are also the most silent and obedient class,” another opined.
(Also read: Employee says he paid ₹1 crore in tax over 14 years, got ‘no support’ after losing job)
