Income tax relief under section 89


When an employee receives salary for more than 12 month in any one financial years due to being paid in arrears or in advance. Due to excess salary he assessed at higher rate than that at which it would otherwise has been assessed, then he can claim relief u/s 89. Basic points are as under:

When an employee can claim this Relief?

1. When employee receives salary in arrears in the previous year.

2.
When employee receives salary in advance.

3.
When employee receives compensations in connection with termination of employment.

Step for Calculation of Relief U/s 89?

Step 1 : Calculate tax for the current year on income including arrear salary /advance salary/ compensations.

Step 2 : Calculate tax for the current year on income excluding salary in arrears/advance/ compensations.

Step 3 : Step1 – step2

Step 4 : Calculate tax for the year in which salary/compensation ought have been received on income including salary in arrears/advance/ compensations.

Step 5 : Calculate tax for the year in which salary/compensation ought have been received on income excluding arrears/advance/ compensations.

Step 6 : Step4 – Step5

Step 7 : Relief u/s 89 = Step3-step6 (if positive, otherwise nil)

Step 8 : Tax need to be paid for Current Assessment year = Step1-step7

Note: Tax should be calculated inclusive of cees and education cess

Details required to claim relief u/s 89

Rule – 21AA :  Where the assessee as an employee is entitled to relief  under sub-section (1) of section 89 (1) he may furnish , the specified details in Form No 10 E,  to the person responsible for making the payment u/s 192(1).

2 Comments

  • Anuj (#)
    June 2nd, 2017

    Good article…will be sharing with my friends

    • ca.aryendra (#)
      June 3rd, 2017

      I am very much thankful your motivation.

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