Income Tax Relief Under Section 89 Read with Rule 21A

By | September 20, 2015

TAXRELIEF

Usually salary income is chargeable to tax either on due basis or on receipt basis. For the purpose of changeability salary consist of;

  1. Any salary due from an employer including former employer in the previous year, whether or not actually received.
  2. Any salary paid or allowed in the previous year by or on behalf of employer including former employer, although not due or before it became due, and
  3. Any arrears of salary paid or allowed in the previous year by or on behalf of employer including former employer, if not charged to income tax in any of the previous year.

 If an employee is in receipt of any component of his salary in arrears or paid in advance, or receives profit in lieu of salary, he can claim relief as allowed by Section 89 read with rule 21A of Income Tax Act and Income Tax Rules. The relief can be claimed for following;

  1. Relief in respect of salary or family pension received in arrears or in advance [Rule 21A(2)]
  2. Relief in respect of gratuity [Rule 21A(3)]
  3. Relief in respect of compensation on termination of employment [Rule 21A(4)]
  4. Relief in respect of payment of commutation of pension [Rule 21A(5)]
  5. Relief in respect of other payment [Rule 21A96)]

Provided that no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under clause (10C) of section 10 in respect of such, or any other, assessment year.

Now let us elaborate and understand the each case separately.

Tax CutRelief in respect of salary or family pension received in arrears or in advance [Rule 21A(2)]

The relief on salary received in arrears or in advance is computed in the manner as refined by rule 21A(2) which is produced as below;

  1. Calculate the tax payable on the total income, including the salary received in arrears or in advance, of the relevant previous year in which the same is received.
  2. Calculate the tax payable on the total income, excluding the salary received in arrears or in advance, of the relevant previous year in which the additional salary is received.
  3. Find out the difference between tax at (1) and (2).
  4. Compute the tax on the total income after including the salary received in arrears or in advance in the previous year to which such salary relates.
  5. Compute the tax on the total income after excluding the additional salary in the previous year to which such salary relates.
  6. Find out the difference between tax at (4) and (5).
  7. Amount of relief: The excess of tax computed at (3) over tax computed at (6)

Relief in respect of gratuity [Rule 21A(3)]

Relief for gratuity can is claimed if the amount of gratuity received is in excess of gratuity specified under section 10(10). However no relief is permissible if the taxable gratuity is received for less than 5 years of service period. The amount of relief is admissible in the as per following category

  1. Where gratuity payable is in respect of past service of 15 years or more

       The amount of relief is calculated as follows:

  1. Compute the average rate of tax on the total income including the gratuity in the year of receipt
  2. Find out the tax on gratuity at the average tax rate as computed in (1)
  3. Compute the average rate of tax by adding 1/3 gratuity to preceding 3 previous years
  4. Find out the average of 3 years average rate as computer in (3) and compute the tax on gratuity at that rate
  5. Relief admissible : difference between (2) and (4)

      2. Where such period is 5 years or more but less than 15 Years

       The amount of relief for this category , the relief is calculated as on the similar lines of above with only difference that instead of average of average rates of 3 years, the average of average rate of 2 years shall be taken by adding ½ of gratuity to each of two preceding year.

Relief in respect of compensation on termination of employment [Rule 21A(4)]

If the compensation received by the employee from his current or previous employer at or in relation with termination of his employment after completion of 3 years of service and unexpired portion of his term of employment is more than 3 years, the relief is calculated in the same manner as if gratuity paid to employee in respect of service rendered for a period of 15 years or more.

Relief in respect of payment of commutation of pension [Rule 21A(5)]

A relief can be claimed in respect of commutation of pension received in excess of limits specified under section 17(1)(ii). Such relief is computed in the same manner as if gratuity paid to employee in respect of service rendered for a period of 15 years or more.

Relief in respect of other payment [Rule 21A(6)]

In respect of any other payment received by employee other than those specified above, the relief will be granted by the CBDT after examination of circumstances of each case.

Procedure for claiming the tax relief – In order to claim tax relief under the aforesaid circumstances, the employee should give relevant information in his income tax return.

Basically relief under section 89 is arithmetical. It involves finding out two tax rates.

19 thoughts on “Income Tax Relief Under Section 89 Read with Rule 21A

  1. surender k chauhan

    Which income should I fill in f -16 of the current year. Including arrear received for previous years or excluding?

    Reply
  2. Subramaniyan

    I have already filed ITR for FY 2015-16/AY 2016-17 and acknowledgement received. But I have claimed tax relief under sec 89 for the arrears of pension pertains to 2006 to 2012 received during FY 2015-16. Shall I claim now and how ?

    Reply
    1. Ramesh Kumar

      I have received arriers w.e. f 01/01/2006 to 31/03/2016. Pl tell me how to fill the form 10e for these periods? Can I take the rebate? Which is the procedure?

      Reply
  3. Subramaniyan

    I have already filed ITR for FY 2015-16/AY 2016-17 and acknowledgement received. But I have NOT claimed tax relief under sec 89 for the arrears of pension pertains to 2006 to 2012 received during FY 2015-16. Shall I claim now and how ?

    Reply
  4. MEGH SINGH RATHORE

    I have filed my ITR on 27-08-2015 for A.Y. 2015-16 before due date as offline. It is wrongly calcuted. can I revise it now ? How ?

    Reply
  5. Priyanshu

    form 10e has been filed by me with some mistakes.How can i rectify it or revise form 10e?

    Reply
  6. Balbir Singh Sekhon

    Sir,
    I will receive arrears of pension w.e.f. 01.01.2006 as delinking 33years service for 50% of pension. For how many years the arrears can be adjusted for income tax purposes for Income Tax Relief Under Section 89 Read with Rule 21A. Whether it can be adjusted w.e.f. 2005-06(Financial year) onwards.

    Reply
  7. Pavdan Kumar

    (1) My salary was revised by Ministry of Textiles, Govt. of India w.e.f. 1st January, 1996 and arrears arising thereon were settled until July in July , 1999 to implement revised pay from August, 1999. I have not claimed relief in tax then U/s 89.
    (2) As as pre-2006 retiree, I am claiming relief U/s 89 in VII CPC. Can I now seek relief U/s 89 for arrears received for the revised salary for the period 1st January, 1996 to August, 1999, as explained in Point (1) above.

    If I can claim, kindly guide me method and procedure I have to follow.

    Reply
  8. Tarunasen Mahanta

    I have received arrears w.e.f 07/2012 to 02/2016.Please tell me how to fill the form 10e for these period? Can I take the rebate? Which is the procedure?

    Reply
  9. NAGARAJASETTY R

    what is the last date for filing FORM 10E FY 2016-17 ?

    Reply
  10. RESHMA RAHUL

    Husband has been expired. Amount with respect to previous 20 years was received by his wife in AY 2017-18. will her wife be able to claim relief under section 89?

    Reply
  11. Virender Kumar

    I have received prorata pension arriers Rs. 25020/- per annum w.e. f 01/01/2006 to 31/03/2016. Pl tell me how to fill the form 10e for these periods? Can I take the rebate? Which is the procedure?

    Reply
  12. Tushar Malvankar

    Sir,
    On 29 march i have received salary arrears of the year financial year2014-15 and 2015-16.In that arrears i have received salary of last 4 months of the year 2014-15( i.e.Dec2014 to March 2015) and salary of April 2015 to March 2016.Overall my organisation debited a total tax for that period and deposited to ITD.Now tell me how can I claim refund it by showing in Form 10E ,as my management given split up for those years.Please help me.

    Reply
  13. MahendraK

    I had received arrears of pension for January/february 2016 during 2016-17.Please guide me how to fill up form !)E

    Reply
  14. Krishnendu Dutta

    I have not submit the itr1 in ay-2016-17.can i claim the relief u/s 89 in the AY-2017-18

    Reply
  15. Rajesh

    I got salary for Jan 2017 & feb 2017 in FYI 2017-18.now if Ifill 10e how I calculate tax in case of hra deducte from both year salary including arrear

    Reply
  16. PAVAN BHARADWAJ

    I HAVE RECEIVE IN ARREAR FY 2017-18 FOR THE FY 2012 TO 2014 TOTAL ARREAR 298000/- NPS DEDUCTION -48000/- CASH ARREAR RECEIVED 250000/-
    NPS कि कटोती FY 2012 TO 2014 में घट जाएगी या FY 2017-18 में घटेगी

    Reply
  17. Sameer Garg

    I , being a PSU , encashed my accumulated Earn Leave of 90 days in the current financial year and also received salary arrears for last year. It has execeed my taxable income above 50 lacs.

    Can I get relief for leave encashment under 89(1) and 21A.

    Reply

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