section 89[1] of income tax act

This query is : Open

TRACE (Querist)
24 January 2011

24 January 2011 I HAD RECEIVED SALARY ARREARS FOR LAST THREE YEARS IN THE FINANCIAL YEAR 2010-11.
THE ARREARS INCLUDES TRANSPORT ALLOWANCE & MEDICAL BENIFIT FOR RESPECTIVE PREVIOUS YEARS. IF ARREARS ON TRANSPORT ALLOWANCE & MEDICAL BENIFIT ARE TAKEN TO RESPECTIVE YEARS THEY FALL BELOW THE EXEMPTION LIMITS OF rS 9600 & 15000 RESPECTIVELY.[THESE ARREARS IN THE CURRENT YEAR CROSS EXEMPTION LIMITS]. MY 2 QUERIES ARE
1. IS ARREARS ON TRANSPORT ALLOWANCE & MEDICAL BENEFIT EXEMPTED WHILE SPREADING INCOME OVER RESPECTIVE YEARS FOR CALCULATION OF RELIEF UNDER SECTION 89[1]
2. CAN ARREARS OF TWO YEARS ONLY BE SPREAD WHILE ONE YEAR IS RETAINED ALONG WITH CURRENT YEAR INSTEAD OF SEEKING RELIEF UNDER SECTION 89[1]FOR THAT ONE PARTICULAR YEAR OF ARREARS RECEIVED?
2.

CA Shailesh Kumar Bhagat (Expert)
25 January 2011

25 January 2011 The purpose of Sec 89(1) is to calculate the tax , assumong that the income was received in the year of due. You have to calculate tax based on individual year as per tax provisions in those years. After that tazx arrise as per current year is to calculate and diff. is 89(1) benefit.

2. You cannot do this, You have to go for all the years.

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Ratan Sharma (Expert)
25 January 2011

25 January 2011 1. yes T.A. & medical allowance is to be taken as exempted during calculation.
2. No you can not do this.

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CA Jeen paul (Expert)
25 January 2011

25 January 2011 1)the purpose of section 89 is to give relief to taxpayer for paying tax in excess of what he ought to have paid if he had recived the arrears in their respective years.

under sec you are recalculating the taxable income and tax theron for repective previous years

so the exemption you sought in your question will automatically be taken care of.
2) you can not club the arrear salary with the current year salary

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TRACE (Querist)
25 January 2011

25 January 2011 IF TRANSPORT ALLOWANCE & MEDICAL BENIFIT RECEIVED AS ARREARS IN PREVIOUS FINANCIAL YEARS IS EXEMPTED WHILE CALCULATING SECTION 89[1] RELIEF , THEN WHY IS SECTION 80C BENIFIT OF THOSE YEARS ARISEN DUE TO DEDUCTION TOWARDS PROVIDENT FUND FROM ARREARS RECIVED FOR RESPECTIVE PREVIOUS YEARS NOT GIVEN . i.e. 80C BENIFIT NOT GIVEN WHILE SPREADING ARREARS TO RESPECTIVE YEARS . USING THE SAME LOGIC OF EXEMPTION ELIGIBLE IN THOSE YEARS FOR T.A AND MEDICAL BENIFIT, THE 80C BENIFIT ALSO SHOULD HAVE BEEN GIVEN????