Did you receive any advance

salary or arrears of salary? If yes, you might be worried about the

tax implications of the same. Do I have to pay taxes on the total amount? What

about the tax calculations of the previous year and so on? Taxpayers who have

such questions in their mind, here is all that you need to know.

salary or arrears of salary? If yes, you might be worried about the

tax implications of the same. Do I have to pay taxes on the total amount? What

about the tax calculations of the previous year and so on? Taxpayers who have

such questions in their mind, here is all that you need to know.

By now, you would have already figured

out that income tax is calculated on the total income of a taxpayer for a

certain year. The income can either be in the form of salary or family pension

or other sources of income. However, there might be scenarios where you have

received arrears of family pension or pending salary during the

current fiscal year. It can happen that an income tax payer gets a part of his

profit or salary in advance or as arrears in any financial year, which

increases his total income thereby increase the payable taxes. In such a case,

an application can be made and the assessing officer can grant a relief to the

tax payer. To sum it up, the Income Tax Act ensures there is parity in the

income tax slab rates, and thus, when a portion of the income received does not

pertain to the current year, a relief is granted so that the taxable income

does not increase.

out that income tax is calculated on the total income of a taxpayer for a

certain year. The income can either be in the form of salary or family pension

or other sources of income. However, there might be scenarios where you have

received arrears of family pension or pending salary during the

current fiscal year. It can happen that an income tax payer gets a part of his

profit or salary in advance or as arrears in any financial year, which

increases his total income thereby increase the payable taxes. In such a case,

an application can be made and the assessing officer can grant a relief to the

tax payer. To sum it up, the Income Tax Act ensures there is parity in the

income tax slab rates, and thus, when a portion of the income received does not

pertain to the current year, a relief is granted so that the taxable income

does not increase.

To ensure that you are not burdened

with paying additional taxes, the income tax department provides ReliefU/s 89(1). If you receive any pension or payments for the previous year, you

will not be taxed on the total amount for the current year. Essentially keeping

you away from paying extra taxes, because there was a delay in payment.

with paying additional taxes, the income tax department provides ReliefU/s 89(1). If you receive any pension or payments for the previous year, you

will not be taxed on the total amount for the current year. Essentially keeping

you away from paying extra taxes, because there was a delay in payment.

###
**Download Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10E from the F.Y. 2000-01 to F.Y.2019-20 in Excel.**

**To avail the benefits under Section**

89(1) you would need to submit Form 10E. What is Form 10E would

be the most obvious question. The details of Form 10E, along with how and why

to submit the same is provided in detail below.

##
__What is relief under section 89(1)?__

When the taxpayer receives:

1.

Arrears of salary or

Arrears of salary or

2.

Advance salary or

Advance salary or

3.

Arrears of family pension

Arrears of family pension

then such amount is taxable in the

Financial Year in which it is received.

Financial Year in which it is received.

However, relief under section 89(1) is

provided to reduce additional tax burden due to delay in receiving such

income.

provided to reduce additional tax burden due to delay in receiving such

income.

##
__How to calculate relief under section 89(1)?__

Here are the steps to calculate relief

under section 89(1) of Income Tax Act, 1961:

under section 89(1) of Income Tax Act, 1961:

1.

Calculate tax payable on total income including arrears

in the year in which it is received.

Calculate tax payable on total income including arrears

in the year in which it is received.

2.

Calculate tax payable on total income excluding arrears

in the year in which it is received.

Calculate tax payable on total income excluding arrears

in the year in which it is received.

3.

Calculate difference between (1) and (2).

Calculate difference between (1) and (2).

4.

Calculate tax payable on total income of the year to

which arrears are related, including arrears.

Calculate tax payable on total income of the year to

which arrears are related, including arrears.

5.

Calculate tax payable on total income of the year to

which arrears are related, excluding arrears.

Calculate tax payable on total income of the year to

which arrears are related, excluding arrears.

6.

Calculate difference between (4) and (5).

Calculate difference between (4) and (5).

7.

The amount of relief will be the excess amount of (3)

over (6). No relief shall be allowed if the amount of (6) is more than the

amount in (3).

The amount of relief will be the excess amount of (3)

over (6). No relief shall be allowed if the amount of (6) is more than the

amount in (3).

##
__Example on how to calculate relief under section 89(1)__

Mr. A has total income of Rs.

6,00,000/- for Financial Year 2017-18 (Assessment Year 2018-19) and received

arrears of Rs. 1,50,000/- for Financial Year 2011-12 (Assessment Year 2012-13).

The total income for Financial Year 2011-12 is Rs. 2,00,000/-.

6,00,000/- for Financial Year 2017-18 (Assessment Year 2018-19) and received

arrears of Rs. 1,50,000/- for Financial Year 2011-12 (Assessment Year 2012-13).

The total income for Financial Year 2011-12 is Rs. 2,00,000/-.

The relief will be calculated as

follows:

follows:

1.

Tax on total income of Rs. 7,50,000/- (Rs. 6,00,000+Rs.

1,50,000) including arrears for F.Y. 2017-18 is Rs. 64,375/- (as per rates

applicable for F.Y. 2017-18 i.e. A.Y. 2018-19).

Tax on total income of Rs. 7,50,000/- (Rs. 6,00,000+Rs.

1,50,000) including arrears for F.Y. 2017-18 is Rs. 64,375/- (as per rates

applicable for F.Y. 2017-18 i.e. A.Y. 2018-19).

2.

Tax on total income of Rs. 6,00,000/- excluding arrears

for F.Y. 2016-17 is Rs. 33,475/-

Tax on total income of Rs. 6,00,000/- excluding arrears

for F.Y. 2016-17 is Rs. 33,475/-

3.

Difference between (1) and (2) is Rs. 30,900/- (as

per rates applicable for F.Y. 2017-18 i.e. A.Y. 2018-19).

Difference between (1) and (2) is Rs. 30,900/- (as

per rates applicable for F.Y. 2017-18 i.e. A.Y. 2018-19).

4.

Tax on total income of Rs. 3,50,000/- (Rs. 2,00,000+Rs.

1,50,000) including arrears for F.Y. 2011-12 is Rs. 17,510/- (as per rates

applicable for F.Y. 2011-12 i.e A.Y. 2012-13).

Tax on total income of Rs. 3,50,000/- (Rs. 2,00,000+Rs.

1,50,000) including arrears for F.Y. 2011-12 is Rs. 17,510/- (as per rates

applicable for F.Y. 2011-12 i.e A.Y. 2012-13).

5.

Tax on total income of Rs. 2,00,000/- excluding arrears

for F.Y. 2011-12 is Rs. 2,060/- (as per rates applicable for F.Y. 2011-12

i.e A.Y. 2012-13).

Tax on total income of Rs. 2,00,000/- excluding arrears

for F.Y. 2011-12 is Rs. 2,060/- (as per rates applicable for F.Y. 2011-12

i.e A.Y. 2012-13).

6.

Difference between (4) and (5) is 15,450/-

Difference between (4) and (5) is 15,450/-

7.

The amount of relief will be Rs. 15,450/- [excess

amount of (3) over (6)]

The amount of relief will be Rs. 15,450/- [excess

amount of (3) over (6)]

###
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Utility is the following:-Utility is the following:-

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from the F.Y. 2000-01 to F.Y. 2019-20

from the F.Y. 2000-01 to F.Y. 2019-20

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