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Did you receive any advance salary or arrears of salary? If yes, you might be worried about the tax implications of the same. Do I have to pay taxes on the total amount? What about the tax calculations of the previous year and so on? **Therefore**, Taxpayers who have such questions in their mind, here is all that you need to know. you can reduce your tax by the filling of arrears relief calculation U/s 89(1) and Form 10e

## By now, you would have already figured out that income tax is calculated on the total income of a taxpayer for a certain year. The income can either be in the form of salary or family pension or other sources of income. However, there might be scenarios where you have received arrears of family pension or pending salary during the current fiscal year. It can happen that an income tax payer gets a part of his profit or salary in advance or as arrears in any financial year, which increases his total income.

**In other words**, increase the payable taxes. In such a case, an application can be made and the assessing officer can grant a relief to the tax payer. To sum it up, the Income Tax Act ensures there is parity in the income tax slab rates, and thus, when a portion of the income received does not pertain to the current year, a relief is granted so that the taxable income does not increase by the Arrears Relief Calculation U/s 89(1)

**However**, To ensure that you are not burdened with paying additional taxes, the income tax department provides Relief U/s 89(1). If you receive any pension or payments for the previous year, you will not be taxed on the total amount for the current year. Essentially keeping you away from paying extra taxes, because there was a delay in payment.

** **To avail the benefits under Section 89(1) you would need to submit Form 10E. What is Form 10E would be the most obvious question. The details of Form 10E, along with how and why to submit the same is provided in detail below **For instance**,

## What is relief under section 89(1)?

When the taxpayer receives:

2.

Advance salary or

3.

Arrears of family pension

then such amount is taxable in the

Financial Year in which it is received.

However, relief under section 89(1) is provided to reduce additional tax burden due to delay in receiving such income **Above all**,

## How to calculate relief under section 89(1)?**In addition**,

Here are the steps to calculate relief

under section 89(1) of Income Tax Act, 1961:

1.

Calculate tax payable on total income including arrears

in the year in which it is received.

2.

Calculate tax payable on total income excluding arrears

in the year in which it is received.

3.

Calculate difference between (1) and (2).

4.

Calculate tax payable on total income of the year to

which arrears are related, including arrears.

5.

Calculate tax payable on total income of the year to

which arrears are related, excluding arrears.

6.

Calculate difference between (4) and (5).

7.

The amount of relief will be the excess amount of (3)

over (6). No relief shall be allowed if the amount of (6) is more than the

amount in (3).

## **After that**, Example on how to calculate relief under section 89(1)

Mr. A has total income of Rs.

6,00,000/- for Financial Year 2017-18 (Assessment Year 2018-19) and received

arrears of Rs. 1,50,000/- for Financial Year 2011-12 (Assessment Year 2012-13).

The total income for Financial Year 2011-12 is Rs. 2,00,000/-.

**Similarly**, The relief will be calculated as follows:

1. **In conclusion**, Tax on total income of Rs. 7,50,000/- (Rs. 6,00,000+Rs. 1,50,000) including arrears for F.Y. 2017-18 is Rs. 64,375/- (as per rates applicable for F.Y. 2017-18 i.e. A.Y. 2018-19).

2.

Tax on total income of Rs. 6,00,000/- excluding arrears

for F.Y. 2016-17 is Rs. 33,475/-

3.

Difference between (1) and (2) is Rs. 30,900/- (as

per rates applicable for F.Y. 2017-18 i.e. A.Y. 2018-19).

4.

Tax on total income of Rs. 3,50,000/- (Rs. 2,00,000+Rs.

1,50,000) including arrears for F.Y. 2011-12 is Rs. 17,510/- (as per rates

applicable for F.Y. 2011-12 i.e A.Y. 2012-13).

5.

Tax on total income of Rs. 2,00,000/- excluding arrears

for F.Y. 2011-12 is Rs. 2,060/- (as per rates applicable for F.Y. 2011-12

i.e A.Y. 2012-13).

6.

Difference between (4) and (5) is 15,450/-

7.

The amount of relief will be Rs. 15,450/- [excess

amount of (3) over (6)]

*The feature of this Excel Utility is the following:-*

**1) This Excel Utility can prepare automatic Tax Calculation as per new Finance Budget 2019**

**2) The Salary Structure as per the All of Govt and Non-Govt(Private) employee’s Salary Pattern**

**3) Automated Individually Salary Sheet for each Employee**

**4) Automated Income Tax Salary Sheet for each Employee **

**5) This Excel Utility calculate your House Rent Exemption Calculation U/s 10(13A)**

**6) Automated Income Tax Revised Form 16 Part A&B for F.Y. 2019-20 in New Format**

**7) Automated Income Tax Revised Form 16 Part B for the F.Y. 2019-20 in New Format**

**8) Automated Arrears Relief Calculator U/s 89(1) with Form 10E from the F.Y. 2000-01 to F.Y. 2019-20**

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