Relief U/s 89

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 July 2011 I have received arrear which are exempted allowance for the year 2008-2009, 2009-2010 in the year 2010-2011.Can I deduct the above allowance from the current years Calculation if I Submit 10E?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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09 July 2011 1. For claiming Relief U/s 89, you have to first ascertain the tax liability on Receipt basis by taking the arrears as a part of taxable salary only. Suppose tax amount comes to Rs. 20000/-

2. In Second Step you have to calculate tax on accrual basis for the year on accrual basis leaving the amount of arrears aside. Let the amount comes 15000/-

3. 20000-15000= 5000 tax on arrears.

4. In Third Step you have to calculate tax on accrual basis for all the relevant
previous years in respect of which the arrears have been received. On Year to Year basis you have to find out.
As you have told that arrears are in respect of tax free allowances. So in this particular case net increase in tax liability on accrual basis may be 0. However considering other arrears also I take that the tax liability increases by Rs. x.
5. From Tax on Arrears Para 3 deduct the increased liability "x", as decided in para 4.
6. So 5000-x will be the relief.

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