How to claim Tax Relief
under Section 89 of Income Tax act on Arrears Received
INCOME TAX ON SALARY ARREARS - RELIEF UNDER SECTION 89 (1)
Submit Form 10e for income tax relief for salary arrears
In case you have received any salary arrears , gratuity , family pension or any other arrears pertaining to earlier years than FY 2024-245, you may claim relief under section 89 (1 ) of IT Act . To claim such a relief , one has to submit Form 10E before submitting the IT Return for the year in which arrears are received . ( CLICK HERE TO PRINT FORM 10E ) You may also submit the form in Income Tax department's e-filing website by logging in to your account . Details you may see in the later section of this article .
The Tax relief will be calculated as per Rule 21A of the Income Tax Act
89 Relief calculator -Calculate Tax Relief on Salary Arrears
HOW TO CALCULATE RELIEF ON TAX ARREARS UNDER SECTION 89 :
Let us assume that you have received arrears in the Financial year 2024-25 . The arrears pertain to salaries of FY 21-22, 22-23 , 23-24 and 24-25 Then
1. Calculate Income tax on salary with arrears for the FY 2024-25 Say the income tax is A
2. Calculate Income tax on salary for the year FY 24-25 after reducing the arrears pertaining to FY 21-22,22-23 & 23-24 for the FY 2024-25 Say the income tax is B
3. The difference is extra tax payable by you for FY 2024-25 is C = A - B
4. Now note down the income tax already paid for earlier years with your income without arrears . Say you have paid Income tax D for FY 2021-22 , E for FY 22-23 & F for FY 23-24 . Total Tax paid earlier is D+ E+ F = H
5. Add the income arrears pertaining to each earlier years to your income reported and calculate taxes for each year and say the new tax payable is I for FY 2021-22 , J for FY 22-23 & K for FY 23-24 . Total tax payable now for earlier years is I+ J+ K = L
6. The additional tax payable on account of arrears for previous years is M = L- H
Now under rule 21A , you can chose either C or M whichever is beneficial to you . That means either you can pay a total tax of A or
B+ M whichever is beneficil .
For calculating the Income tax for various years , you may go to our page INCOME TAX CALCULATOR FOR FY 24-25
To calculate the Tax relief , you can use the tool provided by IT Department by CLICKING HERE
TAX RELIEF ON GRATUITY ARREARS
One can get Income tax relief under section 89 (1 ) of Income tax for arrears one get on the Gratuity paid by the employer .
Method of Calculation of TAX RELIEF for Gratuity Arrears :
( In case total service completed is more than 15 years )
1 Calculate Income tax on salary with gratuity arrears for the fy 2024-25 Say the income tax is A
2. Calculate the average rate of tax for the year FY 2024-25 (Total Tax/Total Income)multiplied by 100 ) say P
3. Calculate tax on gratuity amount received based on the average rate ( P ) of the tax that is computed in step 2. Say amount is Q
4. Add 1/3 of Gratuity amount each to the incomes of FY 21-22 , FY 22-23 & FY 23-24
.5 Calculate the tax for each year after adding 1/3 each of gratuity received and calculate the tax rate for each of the three years . Say income tax rates are R, S ,& T for the years Fy 21-22 , FY 22-23 & FY 23-24 respectively .
6.Calculate the average of R, S & T ie R+S+T / 3 = U
7. Calculate tax on the gratuity amount received on the basis of the average rate ( U ) of the tax . Say amount is V
8 Tax relief you can claim on Gratuity is Q- V = W
If completed service is between 5 years to 15 years , average of two preceding years only to be taken and less than 5 years , no relief is available .
To calculate the Tax relief , you can use the tool provided by the IT Department by CLICKING HERE
STEP BY STEP GUIDE TO SUBMIT 10E FORM ON-LINE
The Income Tax Act u/s 89 provides relief to an assesse for any salary or profit in lieu of salary or family pension received by an assesse in advance or arrears in a Financial Year. This relief is granted as the total income assessed is at a rate higher than that at which it would otherwise have been assessed. Such relief can be claimed by furnishing particulars of your income in Form 10E.
HOW TO SUBMIT FORM 10 ( E ) TO IT DEPARTMENT ON-LINE ?
1. Go to New Income Tax e-Filing website
2. Login using your PAN Number and PASSWORD .
3. Go to E-file and click on Income tax Forms
4. In the next screen , click on " File Income Tax Forms "
5. Select " Persons without Business / professional income "
6. In the new screen , Select Form 10E
7. in " Form for claiming relief under section 89 [Form No. 10E]
6. Choose the Assessment Year as 2025-26 and Continue ( Portal is not yet ready for AY 2025-26 )
7. Next screen , click on " Let's get started "
8.Click on the all the relevant arrears you have received during the year .
9. After filling in the details in each section where you have received arrears , click " Preview "
10 . On completion of preview , click on " Proceed to e-verify "
11. After successful e-verification , your screen will show " success "
To read the 10e User Manual published by the income tax department , CLICK HERE
Only on successful filing of 10E , you may file IT Returns and you can claim rebates under section 89 of Income Tax Act for the salary / pension / gratuity arrears you have received .
To know how to down load Form 26as , CLICK HERE
What is Section 89 of Income Tax Act 1961 ?