• Invest
    Investment Suite
    Stocks
    Mutual Funds
    Future and Options
    IPO
    Exchange Traded Funds
    Commodity
    Stockcase (Stock Baskets)
    Currency
    Non Convertible Debentures
    Sovereign Gold Bond
    Exclusive
    NRI Account
    Private Client Group
    Features
    SipIt
    MTF
    Investment Suite
    Exclusive
    Features
  • Platform
    Product Suite
    Kotak Neo App & Web
    Nest Trading Terminal
    NEO Trade APIs
    Features and Tools
    MTF
    Securities Accepted as Collateral
    Margin Requirements
    Payoff Analyzer
    Calculators
    SIP Calculator
    Lumpsum Calculator
    Brokerage Calculator
    Margin Calculator
    MTF Calculator
    All Calculators
    Product Suite
    Features and Tools
    Calculators
  • Pricing
  • Research
    Research Calls
    Long Term calls
    Short Term calls
    Intraday calls
    Derivatives calls
    Pick of the week
    Top Monthly Picks
    Research Reports
    Fundamental Research Report
    Technical Research Report
    Derivative Research Report
    Research Calls
    Research Reports
  • Market
    Stocks
    Market Movers
    Large Cap
    Mid Cap
    Small Cap
    Indices
    Nifty 50
    Bank Nifty
    FinNifty
    Nifty Midcap India
    VIX
    All Indian Indices
    Mutual Funds
    SBI Mutual Funds
    HDFC Mutual Funds
    Axis Mutual Funds
    ICICI Prudential Mutual Funds
    Nippon India Mutual Funds
    All AMC's
    IPO
    Upcoming IPO
    Current IPO
    Closed IPO
    Recently Listed IPO
    Stocks
    Indices
    Mutual Funds
    IPO
  • Learn
    Resource
    Market Ready
    Kotak Insights
    Infographic
    Podcast
    Webinars
    Youtube Channel
    Quarterly Results
    Investing Guide
    Demat Account
    Trading Account
    Share Market
    Intraday Trading
    IPO
    Mutual Funds
    Commodities
    Currency
    Futures & Options
    Derivatives
    Margin Trading
    Events
    Budget 2024
    Muhurat Trading
    Share Market Holiday
    Market Outlook 2024
    Resource
    Investing Guide
    Events
  • Partner
    Business Associates
    Fund Expert
    Kotak Connect Plus
    Startup connect
  • Support
    FAQs
    Circulars
    Bulletins
    Contact Us
    Forms Download
    Get your Statement
​

Salary Relief Under Section 89 Of The Income Tax Act

  •  2m
  • 0•
  • 22 Feb 2023
Salary Relief Under Section 89

In case of a salaried person, there may be an occasion where the company may delay payment of salaries. In the event this happens, the tax burden for the salaried employee may change or increase because of the burden of past dues paid in the current year. Recognizing this hardship, the Government has made provisions to provide relief to salaried employees in case of salary arrears in a particular year. The tax relief under Section 89 covers salary arrears and advance salary as well.

Here are a few steps for you to calculate the tax relief:

Step 1:

You need to calculate the tax payable on the total salary amount including any arrears or advance salary. The Form 16 you get from your employer will contain details about any arrears or advance salary given. You will have to calculate tax on salary by considering standard deductions under Chapter VI like Section 80C for investment linked deductions, Section 80D for health insurance, Section 80TTA for interest income, Section 80G for donations and any other deduction that is applicable on the assessee. The tax will have to be calculated including cess and based on the existing slab rates.

Step 2:

In Step 2, you will need to calculate the total tax on your salary income without considering the salary arrears or advances. You will need to subtract this amount from your salary and then calculate tax after giving effect to deductions just like the calculation in Step 1.

Step 3:

You need to calculate the difference between the tax payable in Step 1 and Step 2. This is the extra burden of tax you need to pay because of the arrears or salary advance.

Step 4:

You need to calculate the total tax payable based on the slabs and rules of the year to which the arrears relate. For example, if your company pays you your salary from the year 2015-16, you will have to calculate your tax payable based on the income from 2015-16 after adding the arrears amount. Deductions will have to be given an effect for this calculation.

Step 5:

Your tax amount for the year to which the arrears pertain is already available based on past returns. In our example above, the tax paid for the year 2015-16 would be available from your past income tax return.

Step 6:

You need to calculate the difference between the actual tax paid from the year of arrears and the tax that would have been payable with the arrears. If the difference in tax because of arrears exceeds the difference in tax from the year of the salary arrear, then the excess is allowed as relief under Section 89. For example, if the extra tax because of arrears in 2019-20 is Rs. 5,000 and the extra tax from 2017-18 to which the arrears pertain is Rs. 4,000, then a relief of Rs. 1,000 will be given to the taxpayer. To get this relief, the taxpayer will have to fill up Form 10E

You can fill up Form 10E online by logging into the Income Tax E-Filing website and going under the section Income Tax Forms. The Income Tax website has rules and guidelines about how to fill Form 10E. The form requires details like:

  • Name and address of employee
  • PAN
  • Residential status
  • Salary received in arrears or advance
  • Payment of gratuity
  • Payment by employer in case of termination of employment before completion of notice period
  • Commuted pension payment

This has to be signed by the employee. It also requires detailed information about the salary arrears or advance to calculate the relief.

  • Total salary received in advance or arrears
  • The excess tax in the current financial year
  • The excess tax in the year of arrears
  • The differential tax or excess tax paid because of arrears or advance salary
  • Relief under Section 89

Apart from salary arrears or advance, the form also deals with relief in case of gratuity, termination compensation or commuted pension. The form 10E income tax has to compulsorily be filled online and submitted. Only if the form is filled up, relief will be available to the salaried employee. The process is fairly simple and can easily be done online to get relief from tax.

Did you enjoy this article?

0 people liked this article.

What could we have done to make this article better?

Read Full Article >
Enjoy Zero brokerage on ALL Intraday Trades
+91 -

personImage
Enjoy Zero brokerage on ALL Intraday Trades
+91 -