An employer pays an employee compensation in connection with the termination of employment, and no specific deduction in section 19 applies. How does the Income-tax Act, 2025 treat the payment?

Section 18(1)(a) of the Income-tax Act, 2025 includes compensation from an employer or former employer in connection with termination of employment, or modification of its terms, in profits in lieu of salary, which section 16 treats as salary. It is not a perquisite, which is a benefit given during employment, and it is not a capital receipt.