In this article, there will be a detailed account of the salary relief under Section 89. The calculation of the tax is generally done on the total income that has been earned by or received by the tax payer in the year. So, if there are some advance earning of the portion of the total salary before due time, then the tax payer gets the benefits of relief of salary according to the section 89 (1).
The liabilities of tax vested upon the tax payer for one FY (financial year) are counted from the income that is generated in that year. There are times though, when the income incorporates arrears. Arrears are basically the previous dues which are paid in the ongoing year. Since the rate of the tax increases with time which means that the tax payer will have to pay more taxes in those cases. But according to the Section 89 of the Income Tax Act, there is a certain relief from those taxes if the payment is done in advance or in the form of arrears.
Calculation of salary Relief According to Section 89
The steps to be followed to calculate the salary relief under Section 89 are as follows.
Step 1: The tax payer will have to calculate the tax payable on the total income he or she generation with the inclusion of the arrears of the last year from which the same has been received. (Let that be X)
Step 2: Next, The tax payer will have to calculate the tax payable on the total income he or she generation with the exclusion of the arrears of the last year from which the same has been received. (Let that be Y)
Step 3: After that, the tax payer will have to subtract the value that is obtained from the second step from the value that is obtained from the first step. (Let that be X-Y) and the new value will be Z.
Step 4: Next, The tax payer will have to calculate the tax payable on the total income he or she generation with the inclusion of the arrears which are related. (Let that be A)
Step 5: Next, The tax payer will have to calculate the tax payable on the total income he or she generates with the exclusion of the arrears which are related. (Let that be B)
Step 6: After that, the tax payer will have to subtract the value that is obtained from the fifth step from the value that is obtained from the fourth step. (Let that be A-B) and the new value will be C.
Step 7: Divide the value calculated from the step 3 by the value found at step 6 and this is the total amount of the relief which has been permitted according to the relief under section 89. Note that if the value that is received from the third step is less than the value received from the sixth step, then tax payer will not be considered eligible for the relief.
A tax payer will be able to have relief for the arrears that relevant to the earning of the previous according to the Income Tax Section 89 (1) of the Income Tax Act of 1961. This particular section has been very prominent starting from the sixth pay of the Commission of Central. Earlier than this, this section mainly covered the relief from gratuity.
Filing of the Form 10E of Section 89 (1) for salary relief under Section 89:
If the tax payer is interested to claim a relief from the regulations of the Section 89, then he or she must file the form 10E according to the rules of the Department of Income Tax. According to this section, generally the relief of the tax is provided through the recalculation of the tax from both the years – the year when the arrears or the advance is received and the year when the arrears or the advance pertain. Adjusting of the taxes are done with the assumption that the arrears has been obtained in the year when they were due.
The steps required to file the Form 10E of Section 89 are given below.
Step 1: Firstly, the tax payer will have to go to the following link. Just copy and paste this address in Google. https://incometaxindiaefiling.gov.in/. After that, the tax payer has to enter the following information to log in.
- User ID, which if the PAN
- DOB, that is, date of birth
Step 2: After the applicant has logged in, he or she will have to click on the option called the “E-File” and choose the “Prepare & Submit Online Form (Other than ITR)” from the “drop down menu”
Step 3: From the drop down menu, next, the tax payer will select the Form 10E.
Step 4: Enter in all the relevant information including the Assessment Year and the click the button called “Continue” to proceed.
Step 5: Next the tax payer will come across a screen with all the instructions related to filling the Form 10E online.
Step 6: After that, the tax payer has to click on all the tabs colored blue and enter in all the information as required.
Step 7: After all the information has been entered, click on the button called “Submit” to finish the process of filing.
There is an option called “Save Draft” which helps to save the information of the applicant if he or she is not able to complete the whole process of filing the form 10E in one sitting. The button can be found near the bottom of the computer screen. The process of application can be completed later as per convenience. In case of the applicant saving the information to complete later, he or she can always carry on the task as per their convenience by following the steps as shown above.
Replication of the Form 10E salary relief under Section 89:
The form 10E of the Income Tax relief under section 89 has been reproduced as follows for the purpose of references.