|Relief under section 89 |

Taxation in Case of Salary Arrear and

Advance Salary Recd.

BY CA Sureshsingh Rawat
 Brief Introduction of Section 89

 Income tax is applicable and calculated on the taxpayer’s total income earned or received
during the financial year.

 If the taxpayer has received a portion of their salary ‘in arrears or in advance’, or received a
Family Pension in arrears, to reduce this tax burden, the assessee can claim relief under
section 89.

 The assessee might have to pay higher taxes because the arrear /advance salary is taxed in
the year of receipt, not in the year it is due.

 The difference in the tax liability in the due year and the receipt year might be due to
changes in the slab rates. For this reason, the provision of relief u/s 89 comes in.

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 Provisional of Income Tax Act

Where, by reason of any portion of an assessee’s salary being paid in arrears or in advance or, by reason
of any portion of family pension received by an assessee being paid in arrears or, by reason of his having
received in any one financial year for more than twelve months or a payment which under the provisions of
clause (3) of section 17 is a profit in lieu of salary, his income is assessed at a rate higher than that at
which it would otherwise have been assessed, the relief to be granted under sub-section (1) of section 89.

An employee must meet certain conditions to claim relief under Section 89(1):

 Salary is received in arrears or in advance;

 Salary received for more than 12 months in one financial year;
 Family Pension is received in arrears;
 Gratuity received for Past Service of the assessee extending over a period of not less than five years.
 Compensation received on termination of employment after continuous service for not less than three
years.
 Commuted Pension
 How to Calculate Relief u/s 89 ?

How to claim relief under section 89 (For Salary received in arrears or advances) ?

This can be better understood with the help of the example below:

● The total Income of Ms. Priyanka (Resident) was Rs. 15,00,000 in FY 2022-23 and also received
an arrear of Rs. 3,00,000 For FY 2021-2022. Her total income in FY 2021-22 was Rs. 7,00,000.

● Total Income means income after taking all eligible deductions etc. (Calculations is as per old
regime)

● Relief Calculation is given on Next Slide.

By CA Sureshsingh Rawat

Provision Explained with
Example.
The total Income of Ms
Priyanka (Resident) was Rs.
15,00,000 in FY 2022-23 and
also received an arrear of Rs.
3,00,000 For FY 2021-2022.
Her total income in FY 2021-22
was Rs. 7,00,000.
Total Income means income
after taking all eligible
deductions (Calculations are
per the old regime).
Relief under section 89 =
Step 3 – Step 4 = 93600 -
62400= 31200
SR
Particulars Amount
No.
“Tax payable on the total income for FY
2022-23, including the arrears”
1 3,66,600
[ 15,00,000 + 3,00,000] = 18,00,000
“Tax payable on the total income for FY
2 2022-23, excluding the arrears” 2,73,000
= 15,00,000
3 “Difference between Step 1, Step 2” 93,600
“Tax payable on the total income for FY
4 2021-22, including the arrears” 1,17,000
[ 7,00,000 + 3,00,000] = 10,00,000
“Tax payable on the total income for FY
5 2021-22, excluding the arrears” 54,600
= 7,00,000
6 “Difference between Step 4, Step 5 62,400
7 “Amount of relief = Step 3 – Step 6 32,200
 About Form 10E

 Form 10E is used to claim relief for arrears or advance salary, particularly when there
has been a delay or non-receipt of salary in a particular year or when salary is
received in advance.

 This form aims to ensure that the taxpayer receives the appropriate tax relief for such
income.

 Remember, your salary slips serve as proof of receipt of arrears, therefore, should be
kept safely.

By CA Sureshsingh Rawat
 How to file Form 10E ?

Form 10E is the form for furnishing particulars of income under section 192(2A) for claiming relief. The
features of Form 10E:

 Form 10E is to be filed before filing the income tax returns. If the form 10E is not filed by the
employee and if they claim for the tax relief, then the Income Tax Department will notify them
regarding the filing of form 10E to get the claim.
 Submitting Form 10E is quite easy as the form is available on the Income Tax Department’s e-
portal. You just have to visit the portal and log in to the account.
 Form 10E is available in the income tax forms section. With some easy steps and filling in the
required information, you can submit the form on the portal. There are annexures given while filling
out the form.
You have to select the relevant annexure and fill it in. Annexure I is for the Salary arrear or Advance
amount. Annexure II is for the gratuity and Annexure III is for the compensation received on
termination of the job. For pension, annexure IV is required to be filled along with the form.
 Income Tax Notice Non-filing of
Form 10E.
 An income tax notice for non-filing of Form 10E is a communication from the tax authorities to an
individual or entity who has claimed relief under section 89(1) of the Income Tax Act but has
failed to submit Form 10E.

 The notice serves as a reminder and requests the taxpayer to file the form and provide the
necessary information to claim the relief.

 The notice will typically specify the reasons for the non-filing of Form 10E and provide a deadline
for compliance. It may include instructions on submitting the form and any supporting documents.

 It is important to respond to such notices promptly and take the necessary steps to comply with
the requirements outlined by the tax authorities.

 Failure to do so may result in that ITR will be filed, but relief will be disallowed
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CA Sureshsingh Rawat

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