Amid Visa Layoffs, Bengaluru Employee Says Taxing Severance Pay Is 'Inhumane': "Needs To Change"

A debate over severance tax in India has gained steam after Visa announced layoffs impacting 7% of its staff. Employees and startup founders are questioning why compensation designed to cushion job loss is taxed so heavily. Many argued that the money meant to support employees during job loss shouldn't be burdened with heavy taxes. The issue went viral when a senior manager at Visa flagged the issue in a LinkedIn post, criticising current tax rules on severance pay.

Saurav Kundu argued that layoffs have become increasingly common and that many companies are making greater efforts to support affected employees through financial assistance, flexible benefits and job placement services. However, he said much of that support is diluted because severance payments are taxed, leaving employees with smaller payouts at a time when they are already facing financial uncertainty.

"Many employees who have been diligent about filing their IT returns and being transparent with the government now face heavy tax bills on the very payments meant to protect them. That feels unfair and short-sighted," he wrote.

See the post here:

Calling for policy reforms, he said exempting or reducing tax on severance would provide meaningful relief to families during difficult transitions and better complement the support offered by employers.

"Exempting or reforming the tax treatment of severance would be a simple, compassionate policy change that could make a real difference for families during an already vulnerable time. It would align government support with the efforts companies are making and show a little mercy when people need it most," he added. 

The post struck a chord online, with many users sharing similar concerns about the current tax rules.

One user wrote, "I think the bigger principle is aligning incentives with intent. If severance exists to cushion an involuntary loss of income, its tax treatment should reflect the purpose. Worth having this conversation for sure."

Another commented, "Taxing severance packages is absolutely inhumane. People who've just lost their jobs deserve support, not another financial blow. Beyond severance, there may also be room to rethink how career transition support is handled, from tax relief to reskilling incentives. Helping people get back into meaningful work quickly benefits everyone."

Previously Bengaluru-based entrepreneur Sanket Sheth, also argued that people who have spent years contributing taxes should not face another major deduction on compensation received after losing their jobs, especially when the payment is meant to provide temporary financial security.