Income Tax relief on arrears of salary of 5 years all paid this year

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This topic contains 1 reply, has 2 voices, and was last updated by Dr. Ashok Dhamija Dr. Ashok Dhamija 3 months ago.

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  • #4201

    Anonymous
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    I was under suspension for a period of about 5 years and was getting only subsistence allowance. Subsequently, my suspension was revoked and the period under suspension was treated as on duty and directions were issued to give me full salary for the suspension period. This order is yet to be implemented, but I am likely to get about Rs. 20 lakh in arrears of salary, being the difference in full salary and the subsistence allowance. My question is whether I will get any tax relief for such arrears of salary since these arrears are of 5 years and not of one year?

  • #4202

    Yes, you’ll be entitled to Income Tax relief in terms of Section 89 of the Income Tax Act, 1961, by recalculating tax for all the relevant years, i.e., the year in which arrears are received and the years to which the arrears pertain.

    The main part of Section 89 of the Income Tax Act is reproduced below for your information:

    89. Relief when salary, etc., is paid in arrears or in advance.—Where an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance or is in receipt, in any one financial year, of salary for more than twelve months or a payment which under the provisions of clause (3) of Section 17 is a profit in lieu of salary, or is in receipt of a sum in the nature of family pension as defined in the Explanation to clause (iia) of Section 57, being paid in arrears, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, the Assessing Officer shall, on an application made to him in this behalf, grant such relief as may be prescribed: …”.

    Therefore, tax relief can be provided on arrears of salary or arrears of pension or of family pension, which are received in a bunch. You can claim this tax relief in your IT Return.

    However, it is mandatory for you to file Form 10E if you want to claim relief under Section 89 of the Income Tax Act. This Form 10E can be downloaded from the Income Tax Department website. The IT Department website also has a fillable form. Search on Google (or locate it on this webpage).

    The arrears of the salary would be apportioned to respective years for which these arrears were paid and the tax for those years would be recomputed. Relief would be granted to you in tax, if this recalculation of tax for the previous years is beneficial to you.

         


    Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers.

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