Is Form 10E applicable for Notice Pay received in Full & Final Settlement?

Yes, Section 89(1) provides relief for salary received in advance or as arrears to prevent excessive tax brackets.

You must file Form 10E on the official Income Tax e-filing portal.

Ensure Form 10E is filed before filing your Income Tax Return for the relevant Assessment Year.

Retain your settlement breakup and Form 16 as proof for any future verification by the Income Tax Department.

Yes, Section 89(1) relief applies here, and Form 10E is the right form. But there is one critical rule most people miss.

FORM 10E MUST BE FILED BEFORE YOU FILE YOUR ITR. If you file the ITR first and then file Form 10E later, the income tax department will disallow the Section 89(1) relief automatically, and you will get a demand notice. The portal enforces this sequence.

How to file Form 10E:

1. Log in to the income tax portal (incometax.gov.in) under e-File > Income Tax Forms > File Income Tax Forms
2. Select Form 10E and choose Assessment Year 2026-27 (for FY 2025-26)
3. Under Table A (Annexure I), fill in the Salary arrears or advance details. In your case, the notice pay for April 2026 that was paid and taxed in FY 2025-26 is treated as salary received in advance
4. The form calculates the relief amount using the spreading formula (what your tax would have been if the amount had been received in the correct year vs the actual tax paid)
5. Submit Form 10E
6. Then file your ITR-1 or ITR-2 and claim the Section 89(1) relief in Schedule SI

The relief amount from Form 10E gets pre-filled in the ITR once you have submitted the form.

This [freelancer and salaried income tax filing guide for AY 2026-27](https://taxgarden.in/blog/freelancer-consultant-income-tax-filing-guide-india-ay-2026-27) covers salary income reporting and Section 89(1) relief in the ITR if helpful.