Salary Arrears-Form10E | How to Claim Relief Under Section 89(1)?

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In this post, we will see “How to claim Relief under Section 89(1) of the Income Tax Act, 1961?”

What is Relief Under Section 89(10)?

Some time it may happen that you receive arrears of salary or advance salary or arrears of family pension in any financial year so it will lead to an increase in your income that will increase your tax liability.

To reduce the additional burden of tax liability ( arise due to advance or arrears of salary or family pension arrears) you can claim relief under section 89(1) read with Rule 21A.


Under Which Cases Relief under Section 89(1) to be claimed?

1. ARREARS OR ADVANCE SALARY (ANNEXURE I)

2. GRATUITY- Past services extending over a period of 5 years or more but less than 15 years (ANNEXURE II)

3. GRATUITY Past services extending over a period of 15 years and more (ANNEXURE IIA)

4. COMPENSATION ON TERMINATION OF EMPLOYMENT-Condition: After continuous service of three years and where an unexpired portion of the term of employment is also not less than three years (ANNEXURE III)

5. COMMUTATION OF PENSION (ANNEXURE IV)


How to Calculate Relief Under Section 89(1)?

Steps to be followed for calculation of relief under section 89(1):

1. Calculate the amount of tax payable on the total income [(i) including the arrears (ii) excluding arrears] in the year in which it is received.

2. Compute the difference between option i & ii ( tax payable difference)

3. Calculate the amount of tax payable on total income of the year to which arrears are related, [(i) including the arrears (ii) excluding arrears]

4. Calculate the difference between option i & ii ( tax payable difference) as per step 3.

5. The amount of relief will be step2 – step4.


What is Form 10E?

It is mandatory to file Form 10E under section 89(1), if you have received your salary in advance or in arrears or arrears of family pension in any financial year then to claim the benefit you need to file Form No. 10E.


When this form Required to be submitted?

To claim relief u/s 89(1), Form No. 10E is to be submitted before filing of Income Tax Returns.


How to file Form 10E?

To file Form 10E you need to visit e-filing portal and click on the “Login Here” button like this

Enter the “PAN” in user ID, password, captcha code and click on the login button.

You will be redirected to the “Dashboard” of your e-filing account after that hover on “e-File” and click on the “Income Tax Forms”

The “Income Tax Forms” screen will appear then you need to fill/select the following information:

1. PAN – it will be auto-populated

2. Form Name: Select the “Form No. 10E – Form for relief u/s 89

3. Select the Assessment Year:

4. Submission Mode: Prepare and submit online

Click on the “Continue” button.

The Form No. 10E screen will appear it will look like this

In the Form No. 10E there are 7 different tabs you need to fill the relevant details.

In the Form 10E tab your personal details will appear check all the details and select the residential status.

After that select the “Annexures” – For arrears or advance salary select the annexure 1.

1. ARREARS OR ADVANCE SALARY (ANNEXURE I)

2. GRATUITY- Past services extending over a period of 5 years or more but less than 15 years (ANNEXURE II)

3. GRATUITY Past services extending over a period of 15 years and more (ANNEXURE IIA)

4. COMPENSATION ON TERMINATION OF EMPLOYMENT-Condition: After continuous service of three years and where an unexpired portion of the term of employment is also not less than three years (ANNEXURE III)

5. COMMUTATION OF PENSION (ANNEXURE IV)

After filling the relevant details click on the “Preview & Submit” button.


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