Relief u/S 89(1) for Ay 2010-11

Dear Prakash,

The assessee can claim relief u/s 89(1) because he is pushed in the higher slab rate or may end up paying more tax because more than 12 months salary is being charged to tax.

Relief for arrears of salary is computed as below:- (rule 21A(2))

1.Calculate the tax payable on total income ,including the additional salary of the relevant previous year in which it is received.

2.Calculate the tax payable on total income,excluding the additional salary of the relevant previous year in which it is received.

3.Find out the difference between tax as calculated in step 1 and tax as calculated in step 2. (SAY A)

4.Compute the tax on total income after including the additional salary in the previous year to which it relates.

5.Compute the tax on total income after excluding the additional salary in the previous year to which it relates

6.Find out the difference between tax as calculate in step 4 and tax as calculated in step 5. (SAY B)

7.Relief = tax at step 3 - tax at step 6 (A-B)

Your Total Arrears is Rs.200000/-. in this yr. u received 20% ie. Rs.40000/-.

(1) For the purpose of Relief u/s 89(1). first include Rs. 40000 in this yrs. salary and calculate tax. Then calculate tax on this yrs. salary without including Rs.40000/-. find out the difference.

(2) After that include Rs.40000/- in the yrs. salary to which it relates. then calculate that yrs. salary without including this amount. find out the difference.

The excess of difference under (1) over difference under (2) will be the relief u/s 89(1).!!!!!!!!!!!!!!!!!!

how will we calculate relief when we will receive the subsequent installments in A.y 10-11.

Originally posted by : Nish*t
	how will we calculate relief when we will receive the subsequent installments in A.y 10-11.

The same way as told above. !!!!!!!

How to relate the arrear to any particular year when one doesnt know for which year he or she has received it.