How to claim Tax Relief under Section 89 of Income Tax act on Arrears Received

INCOME TAX ON SALARY ARREARS - RELIEF UNDER SECTION 89 (1)

Submit Form 10e for income tax relief for salary arrears

In case  you  have  received any salary arrears  , gratuity   , family pension or  any other  arrears    pertaining to earlier years than  FY 2023-24  , you may claim relief under  section 89 (1 )  of IT  Act .   To claim such a relief , one has to submit Form 10E before submitting the IT  Return   for the year in which arrears are received  .    You may also   submit  the form in Income Tax department's e-filing website by logging in to your  account .  Details you may  see  in the later section of this article . 
The Tax relief will be calculated as per Rule 21A of the Income Tax Act    

89 Relief calculator

Calculate Tax Relief on Salary Arrears

      

HOW TO CALCULATE RELIEF   ON TAX ARREARS UNDER SECTION 89  : 

​ Let  us assume that you have received arrears    in Financial year 2023-24   .   The arrears  pertain to salaries of FY   20-21, 21-22 , 22-23  , 23-24 Then 
1. Calculate Income tax   on  salary with arrears  for the fy 2023-24           Say the income tax  is  A 
2. Calculate Income tax   on  salary  for the year fy 23-24   after reducing  the  arrears   pertaining to fy 20-21,21-22   & 22-23   for the fy 2023-24     Say the income tax  is  B
3.  The difference is extra tax payable by you  for fy  2023-24    is C =   A - B 
4.  Now   note down  the income tax already paid  for  earlier years with  your income without arrears  .  Say you have paid   Income tax D for fy 2020-21 , E for  FY 21-22 &   F for FY  22-23 .  Total Tax paid earlier is  D+ E+ F =  H 
 5. Add  the income arrears pertaining to each earlier  years  to your income reported and calculate taxes for each year  and say the new tax payable is   I for FY 2020-21 ,  J for  fy 21-22  &  K for FY 22-23   . Total tax payable  now for earlier years is    I+ J+ K = L  
6.  The additional tax payable on account of arrears for previous years is  M = L- H 

 Now under   rule 21A , you  can chose   either   C or M  whichever is beneficial to you  .  That  means either you can pay  total tax  of  A   or
  B+ M   whichever is   beneficial  

TAX RELIEF ON GRATUITY ARREARS

 One can get Income tax relief under section 89 (1 )  of Income tax for arrears one get on the Gratuity  paid  by the employer  . 

 Method of Calculation  of TAX RELIEF  for Gratuity Arrears  : 
  ( In case total service completed is more than 15 years  )
 1 Calculate Income tax   on  salary with   gratuity arrears  for the fy 2023-24    Say the income tax  is  A 
 2. Calculate the average rate of tax   for the year  Fy 2023-24    (Total Tax/Total Income)multiplied by 100  )   say P
 3. Calculate  tax  on gratuity amount received  on the basis of the average rate ( P ) of the tax that is computed in step 2. Say amount is Q 
 4.  Add  1/3  of Gratuity amount each to the incomes of Fy 20-21  , fy 21-22  & Fy 22-23 
 .5 Calculate  the tax  for each year   after adding 1/3 each   of gratuity received   and calculate the  tax rate for each of the three years  . Sa y income tax rates  are   R, S ,& T for the years   Fy 20-21  , fy 21-22  & Fy 22-23  respectively   .
  6. Calculate  average of R, S & T  ie R+S+T  / 3 =   U
  7. Calculate  tax  on gratuity amount received  on the basis of the average rate ( U ) of the tax . Say amount is V 
  8   Tax relief you can claim on Gratuity is   Q-  V =    W   
​
 If    completed service is between 5 years to 15 years   , average of two preceding years only to be taken  and less than 5 years   , no relief is available . 

STEP BY STEP GUIDE TO SUBMIT 10E FORM ON-LINE

Dated 25.03.2024   : INCOME TAX PORTAL IS  YET TO ALLOW FILING  OF 10e FORM  FOR FY 2023-24  ( AY 2024-25 )  
We will notify readers  as and  when the portal is ready for acceptong the form for FY 2023-24 

The Income Tax Act u/s 89 provides relief to an assesse for any salary or profit in lieu of salary or family pension received by an assesse in advance or arrears in a Financial Year. This relief is granted as the total income assessed is at a rate higher than that at which it would otherwise have been assessed. Such relief can be claimed by furnishing particulars of your income in Form 10E.

HOW TO SUBMIT  FORM 10 ( E  )  TO IT DEPARTMENT ON-LINE ? 

1. Go to New  Income Tax e-Filing website 
2. Login using your PAN Number and PASSWORD . 
3. Go to E-file  and click on Income tax  Forms 
4. In the next screen  , click   on " File Income Tax Forms "   
5. Select " Persons without Business / professional income "  
6.  In the new screen , Select Form 10E 
7.  in "  Form for claiming relief under section 89 [Form No. 10E] 
6. Choose the Assessment Year  as 2024-25  and Continue  
7. Next screen , click on " Let's  get  started " 
8.Click on the  all  the relevant  arrears  you have received during the   year . 
9.  After  filling in the details in each section  where you have received arrears ,  click " Preview " 
10 . On completion of preview , click on  " Proceed to e-verify " 
11. After  successful e-verification , your screen will show  " success "