In this post, We will discuss the tax relief provided under Section 89 of the Income Tax Act, including who is qualified, how the Relief works, and how to submit Form 10E. Whether you have received pay arrears, a pension, or other income in advance, this post will guide you through the process of requesting Relief and ensuring your taxes are calculated correctly.
Let’s look at each section in detail:
Individuals receiving salary, family pension, or other income in advance or arrears throughout the financial year are eligible for tax relief under Section 89 of the Income Tax Act. This Relief helps balance the impact of potentially higher tax rates on their total annual income.
Individuals wishing to claim this Relief must submit Form 10E using the e-filing system and income information. Anyone who has registered on the portal is eligible to apply, as long as they have received their income, profit instead of salary, or family pension in advance or arrears.
Eligibility and document requirements may vary based on individual circumstances and current tax rules. For specific guidance, it’s best to consult a tax professional or review the official guidelines from the Income Tax Department.
Employees must file Form 10E online via the income tax e-filing website to get Section 89 tax relief. This form is required to obtain relief for arrears received in the current year that apply to previous tax years.
Section 89(1) explains how the relief is calculated, which involves recalculating taxes for both the year the arrears were received and the original years they relate to and adjusting the taxes accordingly. Remember to file Form 10E before submitting the Income Tax Return.
Salary arrears refer to any unpaid earnings from a previous period that are settled in a subsequent assessment year. This could result from delayed salary modifications or retrospective increments.
As a result, the payment difference for the next period is categorised as salary arrears. Employers often include this on pay slips in Part B of Form 16.
Below is a breakdown of who can claim relief under Section 89:
Technology has made it easier to calculate Section 89 relief for salary arrears. To calculate it, follow these simple steps:
Step 1: Calculate tax on total income, including additional salary or arrears, in the year it is received.
Step 2: Calculate the tax on total income, excluding the additional salary in the year it was received.
Step 3: Subtract the result of Step 2 from Step 1 to calculate the additional tax due for arrears.
Step 4: Calculate tax on total income (excluding arrears) in the year the arrears happened.
Step 5: Calculate tax on total income (including arrears) for the relevant year.
Step 6: Subtract Step 4’s result from Step 5 to calculate the tax difference for the arrears year.
Step 7: Compare Step 3 and Step 6:
Once you calculate the relief, file Form 10E on the Income Tax Department’s website to claim it.
To claim Relief under Section 89(1) for pay arrears, you must file Form 10E with the Income Tax Department before submitting your tax return. Here’s a simplified way to fill Form 10E online:
And that’s it! Once Form 10E is submitted, you can file your income tax return.
Keep the following points in mind while claiming relief on arrears:
Section 89 of the Income Tax Act of 1961 is a key provision for dealing with the taxation of arrears or advance salary payments. This provision allows taxpayers to adjust their tax liability when they simultaneously receive income from many years. Section 89 promotes justice in the tax system by distributing the tax burden and ensuring taxpayers are not unfairly taxed due to lump sum payments.
We have reached the end of this post. Please post your questions in the comments section below.
Ans: No, Form 10E must be filed before filing your ITR to get the tax relief provided by Section 89(1).
Ans: Individuals who have registered on the e-filing platform can file Form 10E to obtain relief under Section 89 of the Income Tax Act, 1961.
Ans: You cannot download Form 10E. It’s totally online. Hence, it must be submitted after logging into the e-filing portal.