Form 10E u/s. 89(1). Need clarification because Experts have different opinions !!!

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Case Photo

Here is an individual assessee senior citizen aged 89 y.o. He has received Pension arrears of Rs.291125 pertaining to F.Y 2013-14.

 As you can see in the merged image below of "10E FORM" a TDS of Rs.17018 [as shown in 26AS] was deducted on FD's Interest income in F.Y. 2013-14. 

He didn't filed ITR for A.Y. 2014-15, as a result such TDS amount is with IT Dept. 

In form 10E :- 

2) Total income of the previous year is = 170180

3) Arrears received 291125

4) [Previous year 2)+ arrears 3)] = 461305

5) Tax on Total income of previous year (2) = Rs. 0 

 

⁉️Now the question is for column no. (6)

🤖The system is calculating tax as Rs. 19,704

🧠But if we take TDS in account and subtract it by 17018, tax is reduced to Rs.2686.

Out of these two options which one is correct & why do you think so ? Any reference with regards to particular section & rules which justify such reasoning & answer ? Kindly enlighten this case. 

Replies (4)
Quick Summary
A taxpayer sought clarification on Form 10E under Section 89(1) for pension arrears and whether TDS should be deducted while entering tax in Column 6. The reply explained that gross tax must be entered without reducing TDS, as relief is computed separately and TDS is considered during ITR processing.

The system is showing you the gross tax on your total income including arrears, which is a necessary step for the Section 89(1) formula. You should not deduct TDS from this amount when filling out Form 10E; the relief amount will be calculated by the system automatically after you enter the relevant details for the year the arrears pertained to.

Will system consider TDS of Rs.17018 during ITR processing, if TDS amount is not substracted from Rs.19704 ? Will assessee liability be reduced to Rs.2686 automatically?

Section 89(1) provides relief when salary arrears push your total income into a higher slab in the year of receipt. Here is the correct procedure:

1. File Form 10E BEFORE submitting your ITR. If you submit ITR without filing Form 10E first, the claim gets rejected ,  you cannot add it afterwards for that year.

2. The relief is computed by spreading the arrears back to the previous years they relate to. The income tax portal does this calculation automatically in Form 10E ,  you enter: year of receipt, nature of arrears, and the breakdown of which arrears relate to which year.

3. Relief = (Tax in year of receipt at enhanced income) minus (Tax that would have been payable if the arrears had been received in the years they belong to). If the arrears push you from 20% to 30% slab, the relief covers exactly that slab difference.

4. If you received a job change arrear spanning multiple years, you file ONE Form 10E for all arrears and list the year-wise breakup in the table. One Form 10E per ITR, not one per year of arrear.

5. The most common dispute among practitioners is whether to include the arrear in total income first and then claim relief, or reduce total income before computing tax. The correct approach: include the full arrear in total income for the year of receipt, compute tax on that, then claim the Section 89 relief as a deduction from tax payable (not from income). Schedule 89 in your ITR handles this automatically once Form 10E is linked.

For a detailed walk-through of the relief computation with worked examples, this [salary allowances guide](https://taxgarden.in/blog/salary-allowances) covers how different types of salary components are taxed.

I like your effort, but it doesn't solve my query. I guess you didn't go through my question. 

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