Relief under section 89(1)

If you have received any portion of your salary in arrears or in advance, or your have received family pension in arrears, you are allowed some tax relief under section 89(1) read alongwith Rule 21A.

Here’s how you can calculate the tax relief yourself –

Step 1 Calculate tax payable on the total income, including additional salary – in the year it is received

Step 2 Calculate tax payable on the total income, excluding additional salary – in the year it is received

Step 3 Calculate difference between Step 1 and Step 2

Step 4 Calculate tax payable on the total income of the year to which the arrears relate, excluding arrears

Step 5 Calculate tax payable on the total income of the year to which the arrears relate, including arrears

Step 6 Calculate difference between Step 4 and Step 5

Step 7 Excess of amount at Step 3 over Step 6 is the tax relief that shall be allowed.

Note that if amount at Step 6 is more than amount at Step 3 no relief shall be allowed.

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