89 relief on salary arrear

While calculating relief under Section 89(1) on salary arrears, should figures for previous years include income such as ITC income, STCG, agricultural income, and other incomes taxable at special rates, or not?

Replies (1)

For accurate Section 89 relief:

  1. Compute tax including arrears (current year total income)

  2. Compute tax excluding arrears

    • Recompute total income of those years

      • With arrears

      • Without arrears

        Compute tax for each year:

         

      Allocate arrears to past years and:

  3. Relief = Excess tax paid due to arrears

👉 While doing this:

  • Use normal slab income

  • Exclude incomes taxed at special rates from comparison impact

  • Keep agricultural income consistent for rate purposes

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