Tax liability
This query is : Resolved
25 July 2013
I have to return a file of the individual who receives second installment of 6th pay commission.I want to know the taxabilty in this case.?Is there implementation of Section 89??
CA PARAS BAFNA
(Expert)
25 July 2013
The amount received is taxable and relief U/s 89 in respect of earlier years' salary is available.
25 July 2013
But in ma opinion salary is taxable on due or receipt basis whichever is earlier so u dnt think the whole amount is taxed in the year when it first received.??
26 July 2025
Great question! Here’s how taxability and Section 89 relief typically work for arrears like the 6th Pay Commission installments:
---
### 1. **Taxability of arrears (like 6th Pay Commission arrears):**
* Salary arrears are taxable **in the year of receipt**, even if they relate to earlier years.
* So, if the employee receives the **second installment of arrears** in FY 2013-14, the full amount received in that year is taxable in FY 2013-14.
---
### 2. **Whether income is taxed on “due” or “receipt” basis?**
* Salary income is generally taxed on **“due” or “receipt” basis, whichever is earlier**.
* But arrears are amounts paid for **past periods**, so they become taxable only when actually received.
* Therefore, arrears paid in FY 2013-14 are taxable in that year, not in the years to which they relate.
---
### 3. **Section 89 relief applicability:**
* Since these arrears relate to **earlier years' salary**, the employee can claim relief under **Section 89(1)** to reduce the tax burden caused by lump sum receipt.
* The employee has to **file Form 10E** to claim this relief.
---
### 4. **Summary:**
* The **entire arrear amount received in current year is taxable in this year**.
* You **cannot spread the arrears over previous years for tax purposes**.
* You can claim **Section 89 relief to reduce tax liability** by showing tax impact on the arrears spread over the earlier years.
* This helps avoid heavy tax in the year of receipt.
---
If you want, I can help you with the calculation of Section 89 relief or guide you on filling Form 10E. Would you like that?
---
### 1. **Taxability of arrears (like 6th Pay Commission arrears):**
* Salary arrears are taxable **in the year of receipt**, even if they relate to earlier years.
* So, if the employee receives the **second installment of arrears** in FY 2013-14, the full amount received in that year is taxable in FY 2013-14.
---
### 2. **Whether income is taxed on “due” or “receipt” basis?**
* Salary income is generally taxed on **“due” or “receipt” basis, whichever is earlier**.
* But arrears are amounts paid for **past periods**, so they become taxable only when actually received.
* Therefore, arrears paid in FY 2013-14 are taxable in that year, not in the years to which they relate.
---
### 3. **Section 89 relief applicability:**
* Since these arrears relate to **earlier years' salary**, the employee can claim relief under **Section 89(1)** to reduce the tax burden caused by lump sum receipt.
* The employee has to **file Form 10E** to claim this relief.
---
### 4. **Summary:**
* The **entire arrear amount received in current year is taxable in this year**.
* You **cannot spread the arrears over previous years for tax purposes**.
* You can claim **Section 89 relief to reduce tax liability** by showing tax impact on the arrears spread over the earlier years.
* This helps avoid heavy tax in the year of receipt.
---
If you want, I can help you with the calculation of Section 89 relief or guide you on filling Form 10E. Would you like that?
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Opting out" of regime provided under subsection (1A) of Section 115BAC but Form 10IEA is not filed.
- "Please ensure that the Total of the Deductions u/s 54F match the same in Table D in Sch CG"
- Need to correct "Whether it is last installment " response in Form 26 QB
- " Income from House Property " in joint names of co-owners
- REGARDING TDS RETURN OF FORM 27Q
- Notice under e-Verification Scheme
- GST demand notice for ITC reversal against exempted supply.
- RCM ON SECURITY CHARGES FROM INDIVIDUALS
- How to get money back from delisted company
- ITC not to be taken in accounts & GSTR-3B
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
