Income tax on arrear payment

You should explain your situation clearly in the communication to EPFO, that you'll submit your return, avail relief under Section 89, and pay the balance tax to the tax authority directly sounds like a reasonable approach. Section 89 relief is applicable when you receive arrears of salary (or pension in this case) relating to earlier years. This can help reduce your tax liability in the year of receipt by considering the tax for those earlier years. 

Thank you very much sir , i have sent a letter to EPFO stating the points .

Thank you very much sir,   for your kind response. According to your wise advice , I have explained to the EPFO . And I have submitted my return of income tax and paid the balance tax to the income tax authority after availing releif of 89.

Thanks with regards

PRASANTA Bordoloi 

Sir, 

I have intimated to EPF that I have already submitted the e file for AS yr 2025-20 FY 2024-25 , taking the arrear amount as income and sent them the tax Challan No  .of tax payment and form 10 E, Form 89  etc and paid the tax for Rs191500

Now the pf is asking me to deposit the the amount as they have calculated for 341500 .

Now if I again pay the tax amount as they have calculated , there will be over payment of tax ie  ( over payment 341500) 

What should I do now . I am in great distress. Pl advice 

Relief under Sec 89:

• Arrears of pension relating to earlier years are taxable in the year received (salary is taxed on due or receipt basis, whichever is earlier; arrears not taxed earlier are taxed on receipt). But you can spread the tax burden through Sec 89(1) relief.

• Compute the relief using Rule 21A: tax on total income of the receipt year with and without the arrears, versus tax for each earlier year with and without that year's share of the arrears. The difference is the relief.

• File Form 10E online on the e-filing portal before filing the ITR. Without it, CPC disallows the relief (Sec 89(2)).

• Sec 89 relief is available under both old and new regimes. For earlier years, use the slab rates of the regime applicable in those years.

• If EPFO deducted TDS on the arrears, claim it in the ITR. Excess TDS after the relief will be refunded.

You should generally pay any tax due to the Income-tax Department, not by DD to EPFO, unless EPFO gives you a written statutory basis and an official demand/payment procedure for collecting it. First ask EPFO for the arrear-year breakup, gross amount, TDS computation and the basis for its ₹3,41,000 demand. If this is taxable pension arrears received in September 2024, relief under section 89 may be available, subject to the computation and filing Form 10E before claiming it in the return for the relevant assessment year. The relief is not automatic: compare the tax with and without the arrears across the years to which they relate.

Write to EPFO explaining that you will report the arrears, calculate and pay any net tax through the prescribed income-tax process, and claim section 89 relief if eligible; request that it not collect an unverified amount. Do not ignore a formal notice or a demand supported by a clear legal basis. Also confirm whether this is pension arrears or a different EPFO payment, since the tax treatment can differ.

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