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How to claim tax relief under Section 89(1) on salary arrears
If you have received any portion of your salary in arrears or in advance, or your have received family pension in arrears, you are allowed some tax relief under section 89(1) read along with Rule 21A.
Here’s how you can calculate the tax relief yourself –
Step 1 Calculate tax payable on the total income, including additional salary – in the year it is received.
This figure can be taken from your Form 16.
Step 2 Calculate tax payable on the total income, excluding additional salary – in the year it is received.
You can get the amount of the additional salary (Arrears) from the arrear document given by your employer.
Now you have to subtract the arrear from the total salary received(including the arrears), which can be taken from your Form 16
After knowing the amount after arrear, you need to calculate the tax over the same.
You can use the calculator by clicking on the below mentioned link for calculating the tax.
Step 3 Calculate difference between Step 1 and Step 2
Step 4 Calculate tax payable on the total income of the year to which the arrears relate, excluding arrears
Step 5 Calculate tax payable on the total income of the year to which the arrears relate, including arrears
Step 6 Calculate difference between Step 4 and Step 5
Step 7 Excess of amount at Step 3 over Step 6 is the tax relief that shall be allowed.
Note that if amount at Step 6 is more than amount at Step 3 no relief shall be allowed.
Once you have calculated this amount i– you can enter the values on ClearTax and proceed to file your return.
Filing Form 10E is mandatory to claim Relief under section 89(1)
What is relief under section 89(1)?
Tax is calculated on your total income earned or received during the year. If your total income includes any past dues paid in the current year, you may be worried about paying a higher tax on such arrears (usually tax rates have gone up over the years).
To save you from any additional burden of tax due to delay in receiving income, the tax laws allow a relief under section 89(1). If you have received any portion of your salary in arrears or in advance, or your have received family pension in arrears, you are allowed some tax relief under section 89(1) read alongwith Rule 21A.
In simple words you are saved from paying more tax because of delay in payment to you.
Income Tax Notice for non-filing of Form 10E
Starting income tax returns for financial year 2014-15 (assessment year 2015-16), the income tax department has made it mandatory to file Form 10E if you want to claim relief under section 89(1). Download Form 10E.
Taxpayers who have claimed relief under section 89(1) but have not filed Form 10E have received an income tax notice from the tax department with the following lines –
The relief u/s 89 has not been allowed in your case, as the online form 10E has not been filed by you. The furnishing of Online form 10E is required as per sec.89 of the Income Tax Act
How to file Form 10E
Form 10E can be filed online. Here are the steps to file Form 10E online –
- Login to https://incometaxindiaefiling.gov.in/ with your User ID and password along with date of birth.
After you have logged in, click on tab named ‘e-File’ and select ‘Prepare & Submit Online Form (Other than ITR)’
- The below screen shall appear. Select Form 10E from the drop down.
- Now select the Assessment Year for which you want to file Form 10E.
- The below screen shall appear with instructions on how to file Form 10E and you keep on clicking on the blue tabs and enter the relevant information.