taxabilty on arrears of pension
This query is : Resolved
Saurabh Avasthi
(Querist)
19 December 2016
Is arrear of pension of year 2008 received in year 2016 taxable in 2016?
20 December 2016
Taxable in 2016, but can seek relief as per section 89(1) and rule 21A.
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Saurabh Avasthi
(Querist)
20 December 2016
sir the employee is voluntary retired in year 2000 ,can he apply for relief of sec.89?
26 July 2025
Great question! Here’s a clear explanation:
---
### Taxability of pension arrears received in a later year
1. **Are pension arrears taxable in the year of receipt?**
Yes, arrears of pension received in 2016, even if relating to 2008, are taxable **in the year of receipt (2016)** as per the Income Tax Act.
2. **Is relief available?**
Yes, relief under **Section 89(1)** is available to mitigate the impact of receiving lump-sum arrears for multiple years. The relief spreads the tax burden across the years to which arrears relate.
3. **Can a voluntary retired employee claim this relief?**
Yes, **Section 89(1) relief is available to all salaried/pension income recipients receiving arrears, irrespective of the mode of retirement (voluntary or otherwise)**, provided the arrears pertain to previous years.
4. **Relevant Rule**
Rule 21A provides the procedure to calculate relief on arrears.
---
### Summary:
| Scenario | Taxability & Relief |
| ------------------------------------------- | ---------------------------------------------------------------------------------- |
| Pension arrears received in 2016 (for 2008) | Taxable in 2016, but relief under Section 89(1) is available to reduce tax impact. |
| Employee retired voluntarily in 2000 | Yes, can claim relief under Section 89(1) on arrears received later. |
---
If you want, I can also help you with a step-by-step example of how to compute relief under Section 89(1) for pension arrears. Would that help?
---
### Taxability of pension arrears received in a later year
1. **Are pension arrears taxable in the year of receipt?**
Yes, arrears of pension received in 2016, even if relating to 2008, are taxable **in the year of receipt (2016)** as per the Income Tax Act.
2. **Is relief available?**
Yes, relief under **Section 89(1)** is available to mitigate the impact of receiving lump-sum arrears for multiple years. The relief spreads the tax burden across the years to which arrears relate.
3. **Can a voluntary retired employee claim this relief?**
Yes, **Section 89(1) relief is available to all salaried/pension income recipients receiving arrears, irrespective of the mode of retirement (voluntary or otherwise)**, provided the arrears pertain to previous years.
4. **Relevant Rule**
Rule 21A provides the procedure to calculate relief on arrears.
---
### Summary:
| Scenario | Taxability & Relief |
| ------------------------------------------- | ---------------------------------------------------------------------------------- |
| Pension arrears received in 2016 (for 2008) | Taxable in 2016, but relief under Section 89(1) is available to reduce tax impact. |
| Employee retired voluntarily in 2000 | Yes, can claim relief under Section 89(1) on arrears received later. |
---
If you want, I can also help you with a step-by-step example of how to compute relief under Section 89(1) for pension arrears. Would that help?
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