Receipt of Salary in Arrears and Relief u/s 89


Sometimes you may have received a portion of your salary in arrears or in advance, or you may have received a portion of your family pension in arrears or in advance. Do you think? Will it be fully taxable in the year of receipt at the higher rates or is there any relief available on it?

Yes! There is a relief available under section 89 of Income Tax Act, but you have to follow some procedure to get eligible for that relief.

Background:

As per Income Tax Act, where an assessee received any portion of salary / profit in lieu of salary / family pension in arrears or in advance in any one financial year, of salary of more than twelve months or other payments, due to which his total income is assessed at a higher rate than at which it would otherwise have been assessed, the Assessing Officer shall, on an application made to him in this behalf, grant relief.

In simple words; whenever you receive any portion of salary or family pension which relates to the past periods rather than the current year, that receipt may increase your total income of the current year and you may be attracted a higher slab rate which results in higher tax.

To cover up this situation and maintain parity in slab rates, a provision to provide relief is available in the Income Tax Act.

Calculation of relief:

To understand calculations of relief in a better way, let's take an example:-

Suppose you received salary in arrears of Rs.1 Lac in March, 2019, [which is for past period services rendered in financial year 2010-11.]

  • Total Income of FY 2018-19 (excluding salary in arrears) is Rs. 10 Lac
  • Total Income of FY 2010-11(excluding salary in arrears) was Rs. 5 Lac

Slab Rates

Note: If you have received salary in arrears for more than one financial year then the above process shall be followed for each financial year separately.

Conditions to be followed

To avail benefit of relief u/s 89, you have to fill out a Form No. 10E, which can be filled online and has to submit to your employer.

Remember: Filling of Form No. 10E is mandatory in case of claim of Relief u/s 89. You may be served a notice from Income Tax Department for non-filing of Form no. 10E and denial of relief u/s 89.

DISCLAIMER: The views expressed in this article are strictly of the author. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation by the author. The author does not accept any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

The author can also be reached at cavrjsharma@gmail.com

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Vikas Sharma 
on 06 May 2019
Published in Income Tax
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