What is Relief u/s 89(1)
Tax is calculated on your total income earned or received during the year. If you have received any portion of your ‘salary in arrears or in advance’, or your have received family pension in arrears, Receiving salary or pension in arrears might change your tax situation. To protect you from any additional tax burden, You are allowed some tax relief under section 89(1) due to delay in receiving income. This relief can be directly claimed in your income tax return, if you have received any portion of your salary in arrears.
In other words, if sum received as arrear is taxed in the year to which it belongs then tax liability could be lower than tax liability if it is taxed in current year. The excess tax liability due to delay in receiving income is allowed as relief u/s 89(1). It is must to file form 10E to claim tax relief u/s 89(1)
As per the Income Tax Act 1961, the Income Tax Section 89(1) a taxpayer can receive arrears relief relevant to the previous year’s earning. Section 89(1) is prominent since the 6th Pay Commission of Central. Previously, this section was applicable only for relief from the gratuity.
Calculating relief under section 89 (1)
Certain steps have to be followed to calculate relief under section 89 (1). These steps are as follows:
- Step 1: The taxpayer should find out the tax payable on his total income including arrears .(Ex: A)
- Step 2: The taxpayer should then find out the tax payable on his total income excluding arrears. (Ex: B)
- Step 3: Subtract the value obtained in step 1 from the value obtained in step 2. (e., A-B) and result value assumed C.
- Step 4: Find out the tax payable on the total income (including arrears) of the year to which the arrears are related. (Ex: “D”)
- Step 5: Find out the tax payable on the total income (excluding arrears) of the year to which the arrears are related. (Ex: “E”)
- Step 6: Subtract the value obtained in step 5 from the value obtained in step 4 (i.e., D-E). (Ex: “F”).
- Excess of tax computed at step 3 over tax computed at step 6 is the amount of relief allowable under section 89. If tax computed at step 3 is less than tax computed at step 6 the taxpayer will not be eligible for any relief.
Section 89(1) – Filing Form 10E
The Income Tax Department has made it mandatory to file Form 10E if a taxpayer wants to claim relief under Section 89(1). As per Section 89(1), tax relief is provided by recalculating tax for both the years, the year in which arrears are received and the year to which the arrears pertain. The taxes are adjusted assuming arrears were received in the year in which they were due. Few steps have to be followed to file Form 10E.
Before these you can download form 10E by clicking the lick given below and fill it manually then it will be easy to put figures while filing form 10E online.
Download form 10E in PDF
Steps to file form-10E online are:
- Step 1: Go to https://incometaxindiaefiling.gov.in/ and login with your ‘User ID’ (i.e. PAN), and ‘Password’.
- Step 2: Click on tab titled ‘e-File’ and select ‘Prepare & Submit Online Form (Other than ITR)’ from the drop down menu.
- Step 3: Choose ‘Form 10E’ from the drop down menu.
- Step 4: Fill the relevant Assessment Year and press ‘Continue’ button.
- Step 5: You will find the screen shown below with instructions to e-file Form 10E.
- Step 6: Click on all the blue tabs one by one and fill relevant details.
- Step 7: Click on ‘Submit’ once you are done to complete the process.
In case if you are not able to complete the whole process at one go you can save the information filled by clicking on the ‘Save Draft’ button at the bottom of the screen and complete it any time later. In case if you have saved the Form 10E in draft you can complete it later by following the same process flow as stated above.
If ITR is filed claiming relief u/s 89(1) then it is must to file form 10E, otherwise you have to face income tax notice and relief will be denied and you may have to pay differential tax with interest and penalty.
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