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.

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.

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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.

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.

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To ensure that

you are not burdened with paying additional taxes, the income tax department

provides Relief U/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.

you are not burdened with paying additional taxes, the income tax department

provides Relief U/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.

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.

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:

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.

amount is taxable in the Financial Year in which it is received.

However,

relief under section 89(1) is provided to reduce additional tax

relief under section 89(1) is provided to reduce additional tax

Burden due to

delay in receiving such income.

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:

steps to calculate relief 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 the difference between (4) and (5).

Calculate the 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 the 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/-.

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:

will be calculated as 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)]

## What is Form 10E?

For claiming

relief under section 89(1) for arrears of salary received, it is mandatory to

file Form 10E with the Income Tax department. If Form 10E is not filed and

relief is claimed, then the taxpayer is most likely to receive notice from

Income Tax department for not filing Form 10E.

relief under section 89(1) for arrears of salary received, it is mandatory to

file Form 10E with the Income Tax department. If Form 10E is not filed and

relief is claimed, then the taxpayer is most likely to receive notice from

Income Tax department for not filing Form 10E.

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