What is relief u/s 89?

Income Tax Income from Salary
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Have you ever heard of salary arrears? It’s when you receive the amount of salary for work that was done in the past. For example, let’s say you were supposed to receive a salary increment last year, but it is paid to you in later months. That additional money you receive in the following FY would be considered salary arrears.

Now, the thing about salary arrears is that they can be a bit tricky when it comes to taxes. So here we have tried to ease some pain by explaining the arrears and its tax caculation.

Section 89 allows for an exemption of tax on salary arrears in certain situations, for example, if you received any outstanding salary in a different assessment year.

This is where section 89 comes in, where you can apply for relief and spread out the tax liability. Here, if you were to pay tax on the full amount in the year you receive it, your tax liability would be much higher than it would have been if you had received the money in the year it was actually payable to you.

Let’s say your total income for the FY 2022-23 is ₹6,00,000 (₹50,000 per month) and your salary increased to ₹8,40,000 (₹70,000 per month) in April 2023, which is effective from 1st January 2022.

So overall you received salary arrears of ₹60,000 in April, for the months Jan, Feb and March as well.

Considering the old tax regime and standard deduction, your tax liability without relief for AY 2023-24 would be ₹82,500. However, if you apply for relief under section 89, your tax liability would be reduced to ₹70,500.

Here’s a detailed example of how to calculate the amount of tax relief u/s 89(1) for salary arrears.

Now, how would you claim this relief? The employer will calculate relief u/s 89 and report in Form 16. Then you (the employee) can claim such relief while filing your ITR.

However, there’s a catch, the ITD has made it mandatory to file Form 10E if you want to claim relief under section 89(1). The reason is that without it, you won’t be able to claim relief under section 89(1), even if you’re eligible for it and you’ll end up paying more taxes than you should.

So, if you ever find yourself in a situation where you receive salary arrears, make sure to check if you’re eligible for relief under section 89. It can help you save some money on taxes!

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How to add relief u/s 89 in quicko.com?

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Hi @Ankit_Kashyap

Quicko (DIY) does not support the feature for adding relief under section 89 as of now. However, there are 2 ways to add salary arrears - relief under section 89.

  1. Quicko DIY: Prepare the entire ITR on Quicko, download the ITR JSON, and upload the same on the income tax portal, then, add the income from arrears of salary, and proceed to e-file.

  2. Book a MEET, where a tax expert will help you file your return considering this income over a video conference meeting.

Hope this helps.

5

If one has received income as arrears during FY 22-23 which corresponds to FY 16-17 to FY19-20 (4 YRS) then how to calculate the tax relief under section 89. In the article by quicko Arrears of Salary- Taxability & Relief under Section 89(1) - Learn by Quicko, the calculation is only for arrear received which corresponds to 1 yr. Any help would be appreciated. @TeamQuicko

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Hi @ranjit

You will have to calculate the tax liability for all 4 years after adding this arrears income and for FY 22-23 as well and then calculate the total relief u/s 89 as mentioned in the article.

For expert assistance with your taxes, you can book a MEET, and connect to a tax expert on an online video conferencing call.

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Will I have to fill 4 separate form 10E ‘s if the arrear corresponds to 4 yrs or does it all come in one form? Does the income tax website have some link for a tax calculator for the previous years to check how much were the slabs in those years? After filling the form 10E, is there a specific section on quicko where I need to claim the section 89 relief? @TeamQuicko

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Is Relief under 89 added in Quicko portal?

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Hi @ranjit @Mridul_Gupta

Section 89 is not supported as of now on Quicko.

You can e-file on the Income tax portal or Book a MEET : MEET Help Centre for expert assistance with your taxes.

10

I have filed form 10E for relief under section 89 and there it has calculated some amount of relief. Now, in my tax return, do I need to enter the income received including arrear or excluding?

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Hi @ranjit

You will have to show the income in your ITR including the arrear amount.

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how to show relief u/s 89 in quicko while filing

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Hi @Karmveer_Singh

Section 89 is not supported as of now on Quicko.

You can e-file on the Income tax portal or Book a MEET : MEET Help Centre for expert assistance with your taxes.

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How 10E form is included while filling ITR

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Hi @Harikesh_Dalal

In case of receipt in arrears or advance of any sum in the nature of salary, relief u/s 89 can be claimed. In order to claim such relief, the assessee has to file Form 10E. The Form must be filed before filing the Return of Income.

16

Have you received an answer to your own query (i.e. can we just show arrears for FY 17-18 and ignore arrears of other years)?

It would be very helpful if you share in this forum for others to see.
Thanks @Shrutika_Shah

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Hey @S_Gupta,

Salary arrears received need to be reported in the ITR and tax needs to be calculated on the same. However, as the salary is received in a different assessment year, relief under Section 89 can be claimed.

18

Im a bank officer, As part of our Bipartite settlement I have arrears salary pertaining to FY 17-18,18-19,19-20 received during FY 20-21.

  1. whiling filling ITR for better tax benefit can I show part of arrears income (received during FY 17-18) u/s 89(1) by filling 10E and rest as income during FY 20-21 ?
  2. I’m not finding section 89(1) to claim on Quicko while filling, can u help?
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Hey @lakshminatha_reddy, yes, you have to show it as arrears income and file Form 10E. The option of showing it as an arrear is in our pipeline for the IT product. However, if you wish to seek the help of a CA to file your return immediately, you could get in touch with us at help@quicko.com

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@Shrutika_Shah
When to file Form10E?
Arrears received in FY2023 (i.e. 04-Apr-2023). Arrears were for salary in FY2021 only.
When do we have to file form 10E? In AY2024 or AY2023?

The employer is demanding proof of submission of Form10E to give relief under section 89(1) in Form16.

Thanks.

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Hi @S_Gupta

You need to file form 10E while filing ITR for FY 2023-24/AY 2024-25 as you received it on 4 April 2023.

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