Yudhishthir Sharma (Article) 11 August 2020
Relief u/s 89 calculate on current year income,
1.calculate tax on including arrears
2.calculate tax on excluding arrears
3. difference consider
4.calculate tax on previous year, of which year arrears recd. including arrear
5. calculate tax on previous year, excluding arrears
6. difference consider
7. relief u/s 89 = 3-6, if positive figure than relief availed and if such figure is negative than no relief.
Manzil Arora (Others) 11 August 2020
Relief u/s 89 is applicable on both, salary received in arrears and in advance. Thus, here are the steps to calculate relief under section 89(1) of Income Tax Act, 1961:
1. Calculate tax payable on total income including arrears in the year it is received.
2. Calculate tax payable on total income excluding arrears in the year it is received.
3. Calculate difference between step 1 and step 2.
4. Calculate tax payable on total income of the year arrears are related including arrears.
5. Calculate tax payable on total income of the year arrears are related excluding arrears.
6. Calculate difference between step 4 and step 5.
7. The amount of relief will be the difference of amount calculated in step 3 over step 6.
No relief shall be allowed if the amount in step 6 is more than the amount in step 3.