What Is Tax Relief Under Section 89(1)?
The total income earned during a year is considered for tax calculation. If your income includes past dues paid in the current year, you might worry about higher taxes on those arrears since tax rates have increased over time. To prevent this additional tax burden, tax laws offer relief under Section 89(1). If you receive part of your salary or family pension in arrears or advance, you are eligible for this tax relief. In other words, this provision ensures you don't pay extra tax due to delayed payments.
If you are eligible for tax relief on salary received in arrears or advance, you must file Form 10E. It is mandatory to fill out this form when claiming tax relief under Section 89(1) of the Income Tax Act 1961. Section 89(1) offers tax relief for delayed salary received as arrears or for family pension received in arrears.
Any individual receiving income from the following during the previous FY -
- Family pension in arrears
- Arrears of Salary
- Advance Salary
- Gratuity
- Compensation on Termination of Employment
- Commuted Pension
- You should log into your income tax account at the website https://www.incometax.gov.in/iec/foportal/. To log in, you would have to enter your user ID, password, and date of birth
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On the main page, choose ‘e-File’ and then choose ‘Income Tax Forms’.
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A new page will open in which you should provide your PAN number and choose ‘Form 10E’ in the ‘Form Name’ section. You would also have to enter the ‘Assessment Year’ and the ‘Submission Mode’ for the form.
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After you provide the details, you will be taken to a new page wherein the instructions for filling up Form 10E will be mentioned.
- You should fill the form as per the instructions and submit it online.
Ever since the Financial Year 2014-15, the Income Tax Department has made it mandatory to file Form 10E for those who want to claim relief u/s 89(1). Individuals who do not file Form 10E and claim relief u/s 89(1) might receive a notice from the Income Tax Department stating that they have not been provided with the relief u/s 89(1).
The basic details of taxpayer required for filing Form 10E have been depicted in step by step pictorial representation below -
STEP 1 :-
- Name and address of the employee who is claiming relief under Section 89(1)
- The residential address of the employee
- Amount of arrear salary received according to the provisions contained in sub-rule (2) of Rule 21A.
- Amount of gratuity payment received for at least the last 5 years for past services according to the provisions contained in sub-rule (3) of Rule 21A
- Amount of compensation received from the present or former employer upon termination of employment. This compensation is payable if the employee has rendered at least 3 years of continuous service or if the unexpired duration of the service is at least 3 years. This compensation is paid according to the provisions contained in sub-rule (4) of Rule 21A.
- Amount of commuted pension received according to the provisions contained in sub-rule (5) of Rule 21A
Further details regarding arrears of salary not taxed earlier (as depicted in the picture below) 
The following details are required to be furnished in the first step
- Name and address of the employee who is claiming relief under Section 89(1)
- PAN number of the employee
- The residential address of the employee
- Amount of arrear salary received according to the provisions contained in sub-rule (2) of Rule 21A
- Amount of gratuity payment received for at least the last 5 years for past services according to the provisions contained in sub-rule (3) of Rule 21A
- Amount of compensation received from the present or former employer upon termination of employment. This compensation is payable if the employee has rendered at least 3 years of continuous service or if the unexpired duration of service is at least 3 years. This compensation is paid according to the provisions contained in sub-rule (4) of Rule 21A
- Amount of commuted pension received according to the provisions contained in sub-rule (5) of Rule 21A
Further details regarding arrears of salary not taxed earlier (as depicted in the picture above)
STEP 2:-
Add further details as required in Annexures
- Annexure 1: Arrears or Advance salary.
Calculation of Relief u/s 89(1) by providing the following details:
- Annexure 2: Details of gratuity.
For the period of services extending over a period of 5 years or more but not more than 15 years.
- Annexure 2/2A: Details of gratuity.
For the period of services extending over 15 years and more.
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Annexure 3: Compensation on termination of employment.
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Annexure 4: Computation of Pension.
Understanding of Sec. 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, then you are allowed some tax relief under section 89(1).
For a taxpayer, tax liabilities for a Financial Year are calculated from the income earned during that year. Sometimes, that income includes arrears. Usually, tax rates increase with time, which means that you may have to pay higher taxes in such cases. However, the Income Tax Act provides you relief in those situations u/s 89(1).
So, if you receive any arrear salary or family pension, you don’t have to be afraid of the increased incidence of taxation. The Income Tax Act allows you to claim tax reliefs on arrear incomes. You should, therefore, understand how the relief would be calculated and how you can file your tax returns to claim the relief.
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