Compute statutory tax relief under Section 89(1) and Rule 21A on salary arrears received in a lump sum to prevent higher tax slab bracket jumps.
Under Section 89(1), claiming relief in your ITR is strictly invalid unless Form 10E is submitted online on the Income Tax portal prior to filing your return.
Net relief reduces current year tax payable; enter this amount in Schedule Relief u/s 89 of ITR.
When an employee receives past salary arrears, advance salary, or gratuity in a lump sum in the current financial year, their total income jumps into a higher tax bracket, causing unfair extra tax liability. Section 89(1) read with Rule 21A provides complete relief by calculating the tax difference between receipt year and accrual year.
If an assessee claims Section 89 relief in their ITR without submitting Form 10E on the income tax portal, the Centralized Processing Centre (CPC) will reject the relief and issue a tax demand intimation under Section 143(1)(a).
| Income Nature | Applicable Sub-Rule | Key Conditions |
|---|---|---|
| Salary Arrears / Advance Salary | Rule 21A(2) | Arrears pertaining to 1 or more previous financial years |
| Gratuity Received for Past Services | Rule 21A(3) | Continuous service ≥ 5 years (5-15 yrs: 2 yrs spread, >15 yrs: 3 yrs spread) |
| Compensation on Termination of Employment | Rule 21A(4) | Continuous service ≥ 3 years |
| Commuted Pension | Rule 21A(5) | Taxable portion of commuted pension |
Log in to incometax.gov.in > e-File > Income Tax Forms > File Income Tax Forms > Select 'Persons with Business/Salary Income' > Form 10E. Fill the past years' salary and arrears data and e-verify.
No. If the extra tax payable in the past year exceeds the extra tax payable in the current year (Diff 1 < Diff 2), the relief is treated as Nil (0). You do not pay any additional penalty.
Yes. Section 89 relief is available under both the New Tax Regime (Section 115BAC) and the Old Tax Regime.