22 November 2007
I would suggest you to first study the Act,our Institute's Study Notes as well as any Text Book on Income Tax and then come out with your doubts
22 November 2007
Section 89 deals with the marginal relief allowed to assessees, if income of previous periods or future periods are taxed in a single assessment year.
eg. College Professors getting DA and increment arreas relating to two or three previous financial years.
When the arrears are taxed on receipt basis, the total income of the assessee goes to a higher income slab. Had the arrears received in the original financial years to which they belong, the assessee would remain the lower taxable income slab.
Because of this bulk receipt of arrears, the assessee is put to hardship to pay higher tax. So, the IT Act allows to claim relief under Section 89 (1).
The concept is the relief amount is equal to the difference between tax calculated for the financial year of receiving the arrears and the tax calculated for the notional receipt of arrears in the respective financial years itself.
The mode of computaion is well explained in VG Mehta reckoner.
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