Download Automated Excel Form 10E-Salary Arrears Relief calculator AY 2018-19 for claiming rebate under section 89(1) of Income Tax Act 1961

As per section 89(1) of the Income Tax Act, 1961 relief for income tax has been provided when in a financial year an employee receives the salary in arrears or advance. As per Rule 21AA of the Income Tax Rules, 1962, Form 10-E  has been prescribed for claiming the relief.

According to the said rule, in case the employee is a Government servant or is an employee in a company, co-operative society, local authority, university, institution or association of body, he/she may for claiming the relief submit the form 10E to his/her employer who is responsible for making the payment of the salary as referred to in sub-section (1) of section 192 of the Income Tax Act, 1961.

In all other cases, the assessee for claiming the relief should file an application in form 10E to his/her income tax assessing officer.   The relief under section 89(1) is allowable in the assessment year in which the arrears or the advance is received by the employee.

Pay revisions, particularly in Government Sector, has become common. Since independence six Pay Commissions have been set up by the Government so far. Recommendations of each commission with retrospective effect have resulted in arrears of salaries. The rationale behind giving this relief under section 89 is that due to the payment of arrear or advance salary received in a given financial year , the income of the employee for that financial year gets increased due to the amount of the arrears or advances. As a result, the income of the employee attracts taxation at a higher rate than that rate at which his income would have been taxed had there been no such arrears or advances.  

The steps involved in computing the relief under section 89(1) basically involves the following steps:

First- spread out the amount of arrears or advance received over the specific financial year to which they relate and recalculate the income tax for each year had the arrears been received during the concerned financial year itself.

Second-calculate income tax for each of the financial years without taking into account the arrears or the advance received.

Third- deduct the total of income tax arrived at the 2^nd step from step-1.

Fourth-calculate income tax for the Financial year in which the arrears is received, including the arrears/advance received.

Fifth- calculate income tax for the Financial year in which the arrears is received, excluding the arrears/advance received.

Sixth- deduct income tax arrived at step-5 from  income tax arrived at step-4

Seventh- deduct income tax arrived at step-3 from income tax arrived at step-6

The figure so arrived is the amount of the relief under section 89(1).

Automated salary arrears relief calculator with Form 10E, have been provided to automatically calculate relief from the F.Y.2000-01 to F.Y.2017-18. It is very simple, automatic and user-friendly utility which calls for minimum effort and data input. users are required to fill only data Input sheet (First Page) and it automatically calculates relief and prepare the Form 10E, Table-A, Annexure-I. Macros must be enabled to use this utility.

Download the Automated Arrears Relief Calculator with Form 10E from W.E.F. 2000-01 to F.Y. 2017-18 ( Updated)

Data input Sheet

Annexure-I

Read More

What is the Procedure of Calculation of Arrears Relief Calculation U/s 89(1) with Automatic Arrears Relief Calculator with Form 10E from F.Y.2000-01 to F.Y.2017-18 (Updated Version)

WHAT IS THE ACTUAL CALCULATION OF ARREARS RELIEF U/S 89(1) AND WHAT'S THE PROCEDURE TO CALCULATE THE ARREARS RELIEF WHICH IS GET THE AMOUNT OF AN EMPLOYEE BEHIND HIS PREVIOUS YEARS. HERE IS GIVEN BELOW THE AUTOMATIC ARREARS RELIEF CALCULATOR SINCE THE FINANCIAL YEAR 2000-01 TO F.Y.2017-18 WITH FORM 10E.

BELOW GIVEN THE METHOD OF CALCULATION U/S 89(1)AS PER THE INCOME TAX RULES.

SECTION 89( l ) RELIEF WHEN SALARY ETC., IS 

PAID IN ARREARS OR IN ADVANCE

Scope of relief under the section in five situations explained

1. Section 89(1) authorises grant of relief in a case where an employee receives salary in arrears or in advance or has received in any financial year salary for more than twelve months, a payment which under the provisions of section 17(3)(ii) is a profit in lieu of salary.  The effect of such increase is that the income will be assessed at a higher rate than it otherwise would have been assessed and it is for this reason that section 89(1) authorises relief to be allowed.  The relief is to be allowed in terms of rule 21A of the Income-tax Rules, 1962.

2. Rule 21A(1) enumerates the following five different situations wherein the assessees will be entitled to relief (four of these are specific situations while the fifth is a residuary one) :

   a.  salary being received in arrears or advance;

   b.  where the payment is in the nature of gratuity in respect of past services extending over a period of not less than five years is received;

   c.  where the payment is in the nature of compensation received by the employee from his employer or former employer at or in connection with termination of his employment after continuous service of not less than three years and where the unexpired portion of the term of employment is also not less than three years;

   d.  where the payment is in the nature of commutation of pension;

   e.  where the payment is not covered by the description given in (a) to (d) above.

The relief is to be worked out in the first four situations in accordance with the specific modes described in rule 21A (2)(a) to (d).

3. The authority to grant relief in the four specific cases is the Income-tax Officer assessing the employee.  In the residua case, it is Central Board of Direct Taxes.

4. The relief under section 89(1) is to be given in the assessment in which the extra payment by way of arrears, advance, etc., is taxed. The mode of granting relief spelt out in rule 21A(2) to 21A(5) would show that in all the four different cases the exercise of giving relief is initiated by bringing to tax the whole of the extra amount in the assessment for the assessment year relevant to the year of receipt. Basically, the relief under section 89(1) is arithmetical. It involves finding out of two rates of tax. The first is the rate of tax applicable to the total income including the extra amount in the year of receipt. The second is finding out the rate by adding the arrears to the total income of the years to which they relate. For this purpose the assessee should be asked for a true and authentic statement of the total income of the earlier years to which the arrears pertain  There is no warrant for issuing a notice under section 148 or calling for returns of income of the earlier years.

Circular : No. 331 [F.  No. 174/102/79-IT(A-I)], dated 22-3-1982.

Click here to Download Automated Arrears Relief Calculator with Form 10E, from the Financial Year 2000-01 to Financial Year 2017-18

Read More