The Relief is available under the following cases:

  • Salary received in arrears or in advance;
  • Salary for more than 12 months in one financial year;
  • Family Pension being paid in arrears;
  • Gratuity
  • Compensation on termination of employment; and
  • Commuted Pension

One important thing to note is that relief can only be claimed if tax paid is actually higher due to receipt of such arrears. If there is no extra tax liability, relief is not allowed. In case of VRS Compensation being received by the employee no relief shall be granted under Section 89 if one has claimed exemption u/s 10(10C) for Voluntary Retirement Scheme. An assessee can claim either exemption under section 10(10C) or relief u/s 89 but not both together.

To calculate the relief, the following steps should be taken:

Step 1: Firstly, calculate the tax due in the current year by including the arrears in your total income.

Step 2: Now calculate the tax due in the current year by excluding the arrears from your total income.

Step 3: Compute the difference of the two figures of Step 1 & 2 and let’s call that difference as ‘X’.

Step 4: Now Calculate your tax due in the year for which the arrears have been received by including the arrears in your total income.

Step 5: Then Calculate your tax due in the year for which the arrears have been received by excluding the arrears from your total income.

Step 6 : After that compute the difference of the two figures of Step 4 & 5 and let’s call the difference as ‘Y’.

Step 7: Lastly subtract X (Step 3) from Y (Step 6) and you will get the relief amount.

This can be better understood with the help of the example below:

Suraj earned Rs. 15,00,000 p.a. in FY 2016-17 and also received an arrear of Rs. 3,00,000 p.a. for FY 2014-15. His total salary in FY 2014-15 was Rs. 6,00,000 p.a.

The table below explains the calculation of relief:

ParticularsTax liability for F.Y. 2016-17Tax Liability for F.Y. 2014-15
Salary inclusive of arrearsSalary without arrearsSalary inclusive of arrearsSalary without arrears
Step -1Step -2Step -4Step -5
Income Tax3,65,0002,75,0001,05,00045,000
Total Tax Liability3,75,9502,83,2501,08,15046,350
Step- 3
Tax at (1) – Tax at (2)
Step- 6Tax at (4) – Tax at (5)( Column Merge required)–– ( Column Merge required)–61,800–
Relief u/s 89 : Step 3 – Step 630,900
Tax payable :-
Tax at (1) – Relief

Relief under section 89 = X-Y = 92700-61800=30900.

Now, after the calculation of relief let’s talk about the mandatory requirement in these cases:

To claim relief u/s 89, you must submit Form 10E online on the Income Tax Website before filing the Return of Income. Remember, your salary slips serve as proof of receipt of arrears therefore should be kept safely.

Form 10E

Form 10E is the form for furnishing particulars of income under section 192(2A) for claiming the relief. The features of Form 10E :

  • The form 10E has the total details regarding the salary of employee, its deductions and arrears received.
  • The form 10E is to be filed before filing of the income tax returns. If the form 10E is not filed by the employee and if they claim for the tax relief then income tax department will notify them regarding filing of form 10E in order to get the claim.
  • Submission of form 10E is quite easy as the form is available on the income tax department’s e portal. You just have to visit the portal and login to the account. If visiting for the portal for the first time then you should register and create valid id and password. The form 10E is available in the income tax forms section. With just some easy steps and filling of the required information you can submit the form on the portal. There are annexures given while filling the form.
  • You have to select the relevant annexure and fill it. Annexure I is for the arrear amount. Annexure II is for the gratuity and annexure III is for the compensation received on termination of job. For pension annexure IV is required to be filled along with the form.

Now, let’s understand the process to file Form 10E:

The steps to file Form 10E online –

  • Login to with your User ID, password and date of birth. Process to file form 10E
  • Now click on tab named ‘e-File’ and select ’Income Tax Forms’. Process to file form 10E
  • The screen shall appear as below. From the 1st drop down select Form 10E. Process to file form 10E
  • Now select the Assessment Year for which Form 10E is to be filed and fill the submission mode as "Prepare and submit online." Income Tax
  • Now when you will click on continue, the Form 10 E screen shall appear as below. You may read the instructions on how to file Form 10E given in the 1st blue tab and then enter the relevant information by clicking on other blue tabs.

Don’t forget on click on “Save Draft” while filling the form and lastly click on “Preview & submit “and you are done with it.

Frequently Asked Questions

Q- Due to past year's salary arrears I have to pay additional income tax. Is there any solution to distribution of arrears if previous year ITR is filed?

To save you from paying higher tax on arrears, section 89(1) is introduced. If total income of previous year includes salary arrears, then you can avail relief under section 89(1).

Q- What are the methods to save tax on arrears?

Section 89(1) of the Income Tax Act,1961 states that if an assessee's income any dues from the previous year, then the assessee can claim relief as per the procedure of section 89(1).

Q- Can I claim relief for an arrear of past years under section 89(1) if it is not mentioned in form 16 and shown as gross income of the current year?

If the details of arrears is not mentioned in Form 16, there is nothing to worry, you can still claim the relief by providing all the details related to arrears at the time of filing of return.

Q- Is it necessary to file previous year’s income tax return to get the benefit of section 89A for arrear salary received?

There is no such requirement by the IT department . the only thing required is the documents and details of the previous years income in respect of arrears to claim relief under section 89(1)

Q- Is the filing of an individual income tax return mandatory to claim relief u/s 89(1) of the income tax act?

To claim relief under section 89(1), the filing of Form 10E and income tax return is mandatory.

Q- What is "Less Relief U/s 87 A" reflect in salary slip as per India income tax?

Relief under section 87A means tax rebate available to the individuals whose total income does not exceed Rs.5 lakh . For this rebate no additional investment is required.

Q- Can I claim relief under Section 89 of the Income Tax Act for HRA arrears?

HRA is the part of the salary and salary arrears comes under the purview of Section 89(1), hence, HRA arrears can be claimed under this section.

Q- How should I get benefit of tax exemption for the arrears of my pension received on 27 March relating to previous three financial years?

To avail tax benefits for the arrears, individual is required to file Form 10E . Form 10E is necessary requirement under section 89(1) to claim a deduction for the arrears including pension arrears.

Q- Is relief u/s 89 available for advance salary received?

Yes, Relief u/s 89 of the Income Tax Act can be claimed for receiving any portion of salary as an advance salary. For understanding, how to calculate the tax benefit under section 89 please refer the detailed calculation explained above.

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.