u/s 89

As per Section 89 and other related provisions, Income Tax Relief will be available in the following situation.

1. Arrears received has to be split in to values related to previous years.

2. As a first step, Income Tax of previous years has to be calculated without including distributed arrears. Then Income tax has to be calculated for all these previous years by including the distributed arrears.

3. Difference in income tax on income with arrears and without arrears for each year has to be calculated.

4. All these differential values in income tax has to be added to find out total difference in income tax if Arrears is distributed to previous years . Let it be called as “A”

5. Then Income Tax for the current years without including the total arrears has to be calculated. Also Income tax for the current year after including total arrears has to be calculated. Now difference between these two Income Tax amount is to be taken as “B”

6. If B-A is a negative value or zero, then no income tax relief is available

7. If B-A is positive value then this amount can be deducted from the Income Tax payable for the current which is known as Income Tax Relief under Section 89 (1) of Income Tax Act.

For more details refer:  tax-relief-under-section-89