Acharya Prashant clarifies that the soul is not a material entity and does not reside within the physical body. He explains that what departs from the body at the time of death is not the soul, but the 'I-sense' or ego tendency. Since the body is material and exists in space and time, the soul, which is non-material, cannot be contained within it. He describes death as the decomposition of the bond between the body and the ego, similar to how a chemical compound like sodium chloride breaks apart. Once this separation occurs, the body loses its consciousness and the ability to perceive itself as distinct from the rest of existence, eventually merging back into the earth.