Amount paid by the employer in the head of the arrears of salary, have you ever thought of tax relief under section 89(1) on salary arrears:
Most of us don’t know about relief under section 89
Most of the employee says it “relief 89” 🙂
- 1 What is tax relief under section 89(1) on salary arrears
- 2 Calculation for relief under section 89(1)
- 3 What is Form 10 E of income tax department
- 4 A procedure of filling Form 10 E
- 5 Income Tax Notice for non-filing of Form 10E
- 6 Step by step guide to filling form 10E annexure 1
- 7 Annexure I of Form 10 E
What is tax relief under section 89(1) on salary arrears
Calculation of income tax depends on the income of the assessee, arrears is the part of the income which was received in the current years of last year.
Means the amounts which we suppose to get last year, is getting in the current year.
The amount of arrear turn your income higher and it will drag you to a higher tax slab.
Although the amount received in the current years which is supposed to get in the previous year is due to the process of the employer, you are liable for the tax.
Also Read: What is Form 15G Form 15H?
In this scenario, the tax department allow the assessee a relief under section 89(1)
To avail the benefit of section 89(1), it is mandatory to fill a form 10e
It is important to understand the claim under section 89(1) of income tax act and fill the form 10E
Calculation for relief under section 89(1)
Relief under section 89 with example:
I like to share my personal example with you along with step by step process to get the benefit of reimbursement tax amount paid.
An amount of ₹ 1,00,000 in FY 2017-18 as arrears which, I was supposed to get in FY 2014-15.
I am working in the multinational company and my earning in FY 2017-18 including arrears is ₹ 5,28,000, tax paid for FY 2017-18 is ₹ 32,150.
on the other hand, my earning in FY 2017-18 excluding arrears is ₹ 4,28,000, tax paid for FY 2017-18 is ₹ 22,350.
Subtracting the value of both the tax paid amount is ₹ 9,800.
let’s go back:
In FY 2014-15 my earning including arrears is ₹ 3,51,000, tax paid for FY 2014-15 is ₹ 18,780.
& In FY 2014-15 my earning excluding arrears is ₹ 2,51,000, tax paid for FY 2014-15 is ₹ 12,780.
After Subtracting the value of both the tax paid amount is ₹ 6,050.
In the Final step:
Subtracting both the differences we get ₹ 3750
That is the amount we can get relief under section 89(1) by filling of form 10E
What is Form 10 E of income tax department
To claim the amount back under section 89(1) which was paid to due arrears, it is mandatory to fill the form without filling the fill you cannot claim back the amount.
A procedure of filling Form 10 E
Filling of Form E is very easy, you can fill the form just by login into income tax portal click here:
After login into the website, you have to click the tab button “e-file” and select “Income Tax Forms” on the second in the row.
Next step is to choose Form no 10E – Form from relief u/s 89 from the drop-down menu and fill the assessment years for which you need to fill 10E, select the submission mode and click continue.
Income Tax Notice for non-filing of Form 10E
From FY 2014-15 it is declared mandatory by the income tax department to fill Form 10E for claim relief under section 89(1).
The assessee who claim relief under section 89(1), but unable to fill Form 10E, will get income tax notice revealing:
“The relief u/s 89 has not been allowed in your case, as the online form 10E has not been filed by you.
The furnishing of Online form 10E is required as per sec.89 of the Income Tax Act”
Step by step guide to filling form 10E annexure 1
Filling of Form 10E annexure 1 is very easy and will be submitted in a few steps only.
After selection of Form 10E you will get this:
There is 7 general instruction on the instruction tab button, it is recommended to read the instruction carefully.
After selecting Form 10E, maximum information is already fetched from PAN card, you only have to select the Annexure I, which is specified for “arrears or advance salary”.
Annexure I of Form 10 E
All you have to do is read every point twice and fill the actual figure from the above point no 1.
- In point 1 – you have to insert total income received in FY for example 2017-2018
- In point 2 – whatever salary or advance you have received required to insert in the column
- Point 3 – shows you the total income received along with arrears.
- Point 4 – according to point 4 you need to enter the figure (tax on total income including arrears), you have calculated after taking benefit of all tax exemptions under section 80C, in some cases, arrears amount drag you into tax slab.
- In point 5 – you need to enter the figure (tax on total income excluding arrears), you have calculated after taking benefit of all tax exemptions under section 80C.
- You will get difference figure automatically in the box of point no 6.
Point 7 “Tax computed with Table “A”
Table A is a separate calculation sheet which in result provide a figure which will fetch in point 7.
Table A is also required to fill out the information correctly:
- First, enter the previous years in the format (XXXX-XX) for example in you are talking about 2016-2017, you have to enter (2016-17).
- In the second column, you have to enter the amount of total income in previous years 2016-17.
- You have to the amount of arrears or advance you received with respect to FY 2016-17 in the third column.
- Point number 4 is very tricky this column automatically add the amount of column 2 and 3, and tell you if you receive the arrears in the same financial years what would be the amount you will get.
- In point 5 you have to enter the amount of tax you have already paid for the total income relevant to the previous year.
- In point no 6, you have to recalculate and enter the tax amount manually considering the arrears into account (the tax amount you paid if you get the arrears amount in the previous year).
- Column 7 provides you the difference of tax amount already paid and paid if arrears received in the same year.
This amount (column 7) will carry forward to above table annexure 1 column 7.
Finally, you will the amount of relief under section 89(1)
After getting the figure and submission of the Form 10E, the final step is you have to enter the figure in column D6 of part ‘D’ – computation of tax payable – “relief under section 89(1), which is mentioned in the ITR 1 form.
Other annexures are also available in form 10E are required to fill as per requirement.
It is mandatory to fill Form 10E for claiming relief u/s 89(1) and before filling ITR form.
- Hey, Amit Kumar Bansal, the man behind this blog. I always passionate about Taxes, Stock Market. This was one of the reasons why I have chosen the field of account. Blogging was not the coincidence it was a proper decision. The main aim of this blog is to help readers to take an informed financial decision. If you like my efforts kindly subscribe to this blog and also let your friends know about this website by sharing.
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