Relief under Section 89 (1) on Arrears of Salary – Excel Download

Normally Salary is received when it gets due. But sometimes in a year the Arrears of Advance salary may be received & gets Taxed in the year of receipt. In such a case, Section 89 (1) provides to claim Tax Relief on the Arrears of Salary received in the current year, which does not pertain to the current year. Form 10E should be filled online before filing the Return of Income.

Example: Salary received in FY 2019-20 along with Arrears. The entire current year’s salary plus arrears of salary gets taxed in the year 2019-20. But relief under section 89(1) is available for Arrears of Salary received in the current year.

What are the steps in calculating Relief under section 89(1)?

Table ‘A’ gives the Tabular calculation as below :

1. Total Income of relevant previous years for which the Salary is received in Arrears.
2. Arrears of Salary for the relevant year.
3. Total Income including Arrears, (as if the arrears could have taxed, had it been received in the relevant previous year. (1+2 =3)
4. Tax on Income as per ‘1’ above.
5. Tax on Income as per ‘3’ above.
6. Difference (5-4), is the tax for relevant previous year/s, after considering Arrears of Salary.

Annexure I calculate the relief.

1. Tax on income including arrears received.
2. Tax on income excluding arrears.
3. Difference (1-2) will be incremental in Tax because of arrears received in the current year.
4. Tax as per point 6 of Table A, above.
5. Now the difference in point No. 3-4 of the above is the relief to be claimed under section 89(1).

In the Downloadable worksheet, the presumptive figures are given for a calculation of Relief.

Relief under Section 89 (1) on Arrears of Salary - Excel Download

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Is it mandatory the Income Tax returns of previous years are filed for which the arrears are received?

No, there are no such requirements prescribed. Therefore the documentary evidence is enough to prove the calculation. i.e. maybe Form 16, Bank Statements, Salary slips, etc..

Can I file Form 10E for Deposit interest?

No, Deposit interest is always taxed on accruals basis & banks always provide the accruals as on 31^st March every year.

Do I have to give Form 10E to my Employer?

It is not necessary to give form 10E to the employer. You can give the necessary calculation to the Employer to consider the relief in Form 16. Form 10E is to be filed online by an Assessee himself.

Following are the steps for filing Form 10E online :

Step 1: Log in to the income tax India e-filing website with your User ID, password

Step 2: Click on the tab named ‘e-File’ and select ‘Income Tax Forms’.

Step 3: The new screen will appear. From the 1st drop down select Form 10E.

Step 4: Select the Assessment Year for which you are filing Form 10E.

Step 5: Select the submission mode as “Prepare and submit online.”

Step 6: Click on continue, the Form 10 E screen shall appear as below. Please read the instructions on how to file Form 10E given there.

Click here to download the relief calculator FY 2020-21.

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