sec 89

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NILESH KULHAR (Querist)

04 February 2011 how many years covered in releif u/sec 89?eg. arrears of salary of year 1983 received in 2011 then what will procedure calculate for these?
and what treatment we do for which year years that excluded in this sec89?

plz sugges me.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

05 February 2011 In case you claim relief in respect to the year 1983, I do not think that you will get
any major relief as the tax slab and rates were higher, in compare to the AY 2011-12 or AY 2012-13.
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U/s 89, you can claim relief considering as many years as you have received the arrears in respect thereof.
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Step 1

A. First you have to calculate the tax liability on receipt basis.
Means considering the arrears as if income of the year. By considering the arrears tax liability is say...... 54000/-
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B. Total Tax paid (Actual)in past 4 years to which the arrears are related is Say 50000/-
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C. As such Actual Tax payments on Receipt Basis comes to 104000/-
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In Second Step-
X. Add the arrears in respective 4 years
and find out the enhanced tax liability due to addition of such arrears of all the years individually.
Let the liability of Tax comes to64000/
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Y. Without considering the arrears receipt -As certain the Liability for the current
year .... let it goes down to 35000/-
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Z. Total Tax payable on Accrual basis comes to 64000+35000=99000
Step 3
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Relief which may be claimed in the current year's Return
is 104000-99000=5000

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