Calculation of relief u/s 89(1)

Question:

Assessee is government employee and received an accumulated arrear for the past 13 years i.e from 1994-2006 in current year. Assessee had taken his PAN in the year 1997 and starts filing his return from the year 2000-01.

My question is how to calculate relief u/s 89(1) as assessee himself don't know the bifurcation of the arrear amount (i.e. kis saal ka kitna arrear usey mila)and also not getting the help from employer. How the arrear amount is to be divided? Should it be bifurcated on estimated basis and what should be done for the year 1994 to 2000, as assessee did not filed the return??

 

Professionals please guide..

Replies (1)
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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.

For further guidance log onto https://www.quicko.com

 

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