In many of the cases taxpayers receive their past dues in the current year, which might become a worrisome situation at the time of filing tax return. In this case, one of the tax laws come to rescue i.e. Section 89 (1) of the Income Tax Act. Let’s understand in brief about relief under section 89 (1) of the Income Tax Act.
What is Section 89 (1) of the Income Tax Act?
If the taxpayer has received a portion of his salary in arrears or advance, or has received a family pension in arrears, the Income Tax Act allows the taxpayer to claim relief under section 89(1). The section 89 (1) of the Income Tax Act saves the assessee from any additional tax burden due to delay in receiving income in the financial year.
Calculation of Income Tax Relief Under Section 89 (1)
In case of any arrears or advance salary/family pension received of past year, taxpayers can save their taxes and avail some tax relief under section 89(1) of the Income Tax Act.
Taxpayers can calculate their income tax relief themselves through process given below-
Step 1: Calculate your tax payable on the total income along with the additional salary received
Step 2: Now calculate the tax payable on the total income excluding the additional salary received.
Step 3: Calculate the difference between Step 1 and Step 2. With this process, you will be able to find the additional tax liability generated due to arrears of income
Step 4: Calculate the tax payable on the total income of the same year which was related to arrears excluding arrears
Step 5: Calculate the tax payable on the total income of the same year which was related to arrears including arrears
Step 6: Now calculate the difference between Step 4 and Step 5
Step 7: In case the amount in Step 6 is more than the amount is Step 3, no tax relief will be allowed. If not, the tax relief shall be allowed.
How to Avail Claim Benefits Under Section 89(1) of the Income Tax Act?
In order to claim benefits, you need to file Form 10E. It is a mandatory process to avail tax relief. You can also file the Form 10E through online mode by visiting the official website of Income Tax Department on the income tax e-filing portal.
Section 89(1) of the Income Tax Act- FAQs
It is a mandatory form filed by the taxpayers to claim tax relief under section 89(1).
Form 10E can be filed online by visiting the official website of Income Tax Department at www.incometax.gov.in
You can claim the tax relief by providing details related to your arrears at the time of filing of return, even if it is not mentioned in Form 16.
