Section 89
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Don't Pay More Taxes Than You Need to: How to Claim Relief Under Section 89
Subhasmita Behera
Posted on
Relief under Section 89

A taxpayer's total income generated or received during the financial year is subject to income tax, which is applicable and computed on that total income. The assessee may file a claim for relief under section 89 if the taxpayer has received a portion of their salary "in arrears or in advance" or if the taxpayer has received a Family Pension in arrears to lower their overall tax liability. Because the arrear or advance salary is taxed in the year, it is received rather than in the year it is due, the assessee may be required to pay more significant taxes than usual. It's possible that shifts in the slab rates are to blame for the disparity in tax liabilities between the year the payment was due, and the year it was received. Because of this, the provision of relief under section 89 comes into play.

To be eligible for relief under Section 89(1), an employee must satisfy the following conditions:-

  • Family Pension is received in arrears
  • Salary is received for more than 12 months in one financial year
  • Salary is received in arrears or in advance
  • Compensatory payment received upon separation from employment
  • Gratuity
  • Commuted Pension

One thing that should be kept in mind is that to qualify for relief, the tax liability must have increased as a direct result of the receipt of such arrears. If there is no additional tax due, relief will not be granted.

How to obtain relief under Section 89?

Step 1: First, determine how much tax you owe for the current year and what year you get paid by adding the arrears to your total income.
Step 2: Figure out how much tax you must pay in the current year, the year you got the earnings, by taking the arrears out of your total income.
Step 3: Find the difference between the figures from Steps 1 and 2, which we'll call 'X.'
Step 4: Now, add the tax due to your total income and figure out how much you owe for the year the arrears were due. This is the year for which the arrears were paid.
Step 5: Figure out how much tax you owe for the year, i.e., when your arrear salary was due, and you got it, by taking the arrears out of your total income.
Step 6: Then, figure out the difference between the figures from Steps 4 and 5, which we'll call "Y."
Step 7: Finally, deduct Y (from Step 6) from X (from Step 3) to find the relief amount.

Form 10E

To claim relief under Section 89, you must complete Form 10E online on the Income Tax Website before filing your Return of Income. Remember that the pay slips prove you got arrears and should be kept safe.

Form 10E gives information about your pay under Section 192(2A) to get relief. This is what Form 10E has:

Form 10E has information about an employee's total income and any arrears or other special incomes they got.
Before you file your income tax forms, you must fill out Form 10E. If the employee doesn't fill out form 10E but still wants tax relief, the Income Tax Department will let them know they need to fill out form 10E to get the claim.
Form 10E is easy to send because it can be found on the Income Tax Department's e-portal. Just go to the site and sign in to your account. If it's your first time using the portal, you should sign up and make a proper ID and password. You can find Form 10E in the area with tax forms. You can send in the form on the site by following a few easy steps and filling in the information that is asked for. There are annexures to the form that you need to fill out.
You must choose the right annexure and fill it out. The amount of arrear is in Annexure I. Annexure II is for the gratuity, and Annexure III is for the compensation you got on termination of your job. For a pension, you must fill out Annexure IV and send it in with the form.

Income Tax Notice for Form 10E Not Filed

An income tax warning for not filing Form 10E is a letter from the tax authorities to a person or business that has asked for relief under section 89(1) of the Income Tax Act but has yet to send in Form 10E.

Form 10E is used to ask for help with salary debts or advance salary, especially if the salary wasn't paid on time or at all in a particular year or if the salary was paid early. This form ensures the user gets a suitable tax break for this income.

When the tax officials see that a taxpayer did not fill out this form but still claimed relief under 89(1) when filing the return, they send the taxpayer a notice to let them know that they did not follow the rules. The notice is a reminder and asks the taxpayer to fill out the form and give the information needed to get the relief.

Most of the time, the notice will explain why Form 10E wasn't filed and give a date for doing so. It might tell you how to send in the form and any other documents that go with it. Responding quickly to these notices and taking steps to meet the tax authority's requirements is crucial. If you don't do this, an ITR might be submitted, but relief might not be given.

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