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 a 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.
Showing posts with label How to calculate Arrears Relief Calculation for Arrears Salary U/s 89(1). Show all posts
Showing posts with label How to calculate Arrears Relief Calculation for Arrears Salary U/s 89(1). Show all posts
Friday, 1 November 2019
Monday, 12 March 2018
Sunday, 18 February 2018
Friday, 16 February 2018
Most of the employees have to get the arrears salary as their previous years, some employees have to get the arrears from the Financial Year 2000-01 and onwards financial Year, in this regard this Excel Based Software can prepare the Form 10 E from the Financial Year 2000-01 to Financial Year 2017-18. You can use this utility to calculate your Arrears Relief U/s 89(1) with Auto fill the Form 10E.
Saturday, 3 September 2016
In Seventh Pay Commission bonanza, lakhs of central government employees will soon receive higher salaries and arrears in one go. This may result in an increase in the tax slab of many employees as they will receive arrears from January 1, 2016.
Suppose an employee's annual salary is Rs 9.50 lakh and receives Rs 1 lakh as arrears, of which Rs 50,000 is for the previous fiscal year. His/her tax slab will change. The total income for this year will be Rs 10.50 lakh as against Rs 10 lakh (including the arrears of this year). Income of individuals above Rs 10 lakh is taxed at the rate of 30 percent while income between Rs 5 lakh and Rs 10 lakh is taxed at the rate of 20 per cent.
Download Excel Based Automated Arrears Relief Calculator including Form 10E for the Financial Year 2016-17
So will employees have to pay an extra tax? No.
There are provisions which provide tax relief to employees due to delay in the receipt of the arrears.
"If an employee or his family receives pension arrears or salary arrears, he or she can claim tax relief under Section 89(1). This Section makes sure you don't end up paying the higher tax due to moving up a tax slab from receipt of arrears. Or because tax slab rates in the year of receipt are higher as compared to the year to which arrears belong to.
How the tax relief is calculated
The tax break is arrived at by recalculating the tax for the both the years in which the arrears are received and the year to which arrears pertain to.
1) Calculate the tax payable on the total salary including and excluding the arrears in the year in which it is received. Calculate the difference between the two and assume it is 'A'
2) Calculate the tax payable on the total salary including and excluding the arrears for every year of which the arrear relates to and sum it up. Calculate the difference between the two and assume it as 'B'.
3) If 'A' is more than 'B', the employee will get tax break equivalent to 'A'.
How it can be claimed
To avail the tax break, it is mandatory under the income tax laws to file Form 10E. The form includes details like the PAN, arrear and advance salary details. This form has to be uploaded on the website of the Income Tax Department.
Sunday, 24 July 2016
The All of Central and State Govt employees Arrears Pay which comes from the 7th Pay Commission, and this Relief had already past.
But the some of the employees of Govt or Non-Govt Concerned who have may get the Salary Arrears from there previous years and they may get the relief the Income Tax U/s 89(1) by the Salary Bifurcation the Salary Year to Year and can get the tax relief by this section.
Some of the employee who have got the arrears salary from 2000-01 or 2016 or between the period of FY 2000-01 to F.Y.20016-17.
Download the Automated Arrears Calculator U/s 89(1) with Form 10E up to F.Y.2016-17 [ This Excel Utility can prepare your Arrears Calculation from the Financial Year 2000-01 to 2016-17, up to date version]
Friday, 13 May 2016
When salary or other income arrears are received in any particular year, one’s tax liability for that year increases. Simply because one’s total income for that year has increased. Most salaried individuals will be able to identify with such situations. But having to pay a higher tax on account of arrears is unfair to the taxpayer. Had he originally received the money in the year(s) that he was supposed to receive it, the additional tax would have been staggered over this time, instead of converging in one year as a lump sum payment.
Monday, 27 July 2015
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 FY 2015-16 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.
Thursday, 12 February 2015
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 2015 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 residuary 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 Financial Year 2014-15
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