Taxpayers can claim relief under Section 89 of the Income Tax Act, when they receive any part of their salary in advance or in arrears. This relief can also be claimed for family pensions received in arrears.
What is Relief Under Section 89 of the Income Tax Act?
If the employed person receives salary arrears or pending compensation along with their salary, they will be entitled to pay more tax as compared to early tax payments. For this, taxpayers can claim tax relief under section 89 for the salaries received in form of arrears or advance. A person can claim relief under section 89 of Income Tax Act, 1961 for the following cases mentioned below-
- Gratuity
- Salary received in arrear or advance
- Commuted value of pension
- Arrears of family pension
- Compensation on termination of employment
- Premature withdrawal from Provident Fund
How to Claim Relief under Section 89 of the Income Tax Act, 1961?
To claim relief under section 89 of the Income Tax Act, the taxpayers are required to fill Form 10E online on the Income Tax website. It is suggested that Form 10E must be submitted before filing the Income Tax Return.
Steps to Fill Form 10E
Below given are the steps to fill form 10E to claim relief under section 89 of the Income Tax Act, 1961-
Step 1: Log in to the Income Tax e-Filing website using your login credentials
Step 2: After successfully logging in, click on the “e-File” tab and a drop-down menu will open. Click on “Income Tax Forms”
Step 3: Now Select “FORM NO. 10E- form for relief u/s 89” from the drop-down menu list
Step 4: Select the “Assessment Year” for which you are filing the relief for, and in “Submission Mode”. Select “Prepare and Submit Online”
Step 5: After clicking on “Continue”, a new page will open for FORM NO. 10E. Enter the details required
Step 6: Click on “Save Draft” while filling up the form, and click on “Preview & Submit” after completing
Relief Under Section 89 with Example
The following example will give you a better understanding of this provision under section 89 of the Income Tax Act.
Suppose, Shyam’s income was Rs. 10,00,000 in FY 2020-21. He gets an arrear amounting to Rs. 1,00,000 per annum. His income in FY2019-20 was Rs. 7,00,000.
The chart below shows the calculation of relief under section 89:
| Details | Taxation for FY 2020-21 | Taxation for FY 2019-20 |
| Income including arrears | Income without arrears | Income including arrears |
| Income | 11,00,000 | 10,00,000 |
| Tax (after relief of Section 87A) | 1,42,500 | 1,12,500 |
| Cess | 5,700 | 4,500 |
| Tax Liability | 1,48,200 | 1,17,000 |
| Difference | 1,48,200 – 1,17,000 = 31,200 | 75,400 – 54,600 = 20,800 |
| Relief Amount | 31,200 – 20,800 = 10,400 | |
| Tax Payable | 1,48,200 – 10,400 = 137,800 |
Hence, Shyam receives a relief amount of Rs. 10,400 in FY 2020-21.
Section 89 of the Income Tax Act- FAQs
Yes. You can claim the relief by providing the details during the time of filing the return, even if it is not mentioned in Form 16.
Yes. HRA arrears can be claimed under section 89 because HRA is considered as a part of salary and all salary arrears comes under the purview of this section.
Yes. If you want to claim tax relief, it is mandatory to file Form 10E.
