Factory is excluded by Indian government from Nokia-Microsoft deal.
Over 5,000 factory workers at Nokia's plant in Chennai, a South Indian city, chose the severance package following the lapse of Wednesday deadline.
The severance option was offered by Nokia after the Indian government's decision to exclude the Chennai factory from the sale of Nokia's handset business to Microsoft, said to have grossed $7.5 billion last month.
The factory has been reeling over the last few days with negligible production and a bleak future as almost 85% of its workforce opted for severance.
Indian authorities earlier accused Nokia of non-payment of taxes by wrongfully claiming an exemption on software exports, the primary reason for exclusion of the factory from the sale being the hope that Nokia would pay future tax liabilities which could be as high as $3.4 billion.
Nokia has challenged the tax bill, and untill now has resisted because of a cash clause imposed by the Indian authorities related to deposits for future liabilities.
Though Nokia has been allowed to continue making mobile phones at the factory, it cannot sell or transfer the plant until the resolution of the tax issue, as per the Indian Supreme Court ruling.
Indian tax officials have also ordered a special audit of Nokia India accounts by an external auditor, according to the Wall Street Journal, as the company sent a letter to the prime minister requesting an international arbitration.
The company has already scaled down operations at its Chennai factory, shifted production to other plants, and had offered to buy out employees beginning April 14.