I am a government employee since 2010, due to some admin error my annual increments were not sanctioned for 6 consecutive years. Now, it has been sanctioned and an amount of Rs 1,50,000/- was paid as arrears. Now my annual income for the year 2016-17 comes to Rs 4,50,000. My gross salary from 2011 was around 2,50,000 and I have not filed ITR nor my employer issued a Form 16 for the years 2011-12 to 2015-16. Now, am I eligible for relief under Sec. 89 or not?
-A. Manoj Kumar
Yes you will be eligible for relief under section 89. You will have to fill up Form 10E with these details and then submit it to your employer to claim the relief. Keep your salary slips handy to provide as proof of receipt of the arrears. Please note that if you do not have to pay excess tax due to the arrears, then you do not get the relief.
Section 89 comes in picture when salary/pension or other components are paid in arrears or advance. According to Section 89, if you get salary in arrears or advance in a financial year due to which your total income for the year increases, which in turn increases your taxable income, you can claim for relief under Section 89. You will have to fill up Form 10E with these details and then submit it to your current employer to claim the relief. Form 10E has to be submitted online and no copy is required to be attached with your tax return.
Here's how relief u/s 89 is calculated
Step 1: Calculate tax for the current year (including cess and education cess) on income including salary in arrears/advance/compensations.
Step 2: Calculate tax for the current year (including cess and education cess) on income excluding salary in arrears compensations.
Step 3: Step 1 minus Step 2
Step 4: Calculate tax for the year in which salary ought have been received (including cees and education cess) on income including salary in arrears compensations.
Step 5 : Calculate tax for the year in which salary/compensation ought have been received (including cess and education cess) on income excluding salary in arrears
Step 6 : Step 4 minus Step 5
Step 7 : Relief u/s 89 = Step 3 minus Step 6 (if positive, otherwise nil)
Step 8 : Tax paid for Current Assessment year = Step1 minus step7