Relief for Arrear Salary Under Section 89

Direct Taxes (including International Taxation) | By ALOK PATNIA | Last updated on Oct 5, 2017

Updated as on 24th 2014

Relief under section 89 is allowable to mitigate the extra tax burden that arises due to receipt of any sum, being paid as arrear or in advance resulting in increase in tax liability.

Relief u/s 89 is available in the following situations:

salary being received in arrears or advance;
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;
where the payment is in the nature of compensation received by the employee 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 and the same has not been claimed as deduction under other section;
where the payment is in the nature of commutation of pension;
where the payment is in the nature of family pension.

Basis of Calculation:

Calculate tax payable on total income, including the additional salary of the relevant previous year in which the same is received.
Calculate tax payable on total income, excluding the additional salary of the relevant previous year in which the same is received.
Find out the difference between the tax at (1) and (2)
Compute the tax on total income after excluding the additional salary in the previous year to which such salary relates.
Compute the tax on total income after including the additional salary in the previous year to which such salary relates.
Find out the difference between the tax at (4) and (5)
The excess of tax computed at (3) over the tax computed at (6) is the amount of relief admissible under section 89(1). No relief is, however, admissible if the tax computed at (3) is less than the tax computed at (6). In such a case the assessee-employee need not apply for relief.

We provide all types of ITR filing services. Please click here for more information on ITR filing and calculation of relief.

Please feel free to write to us at [info@taxmantra.com] or call us at +91 88208208 11.

Previous Post Next Post

Updated as on 24th 2014

Relief under section 89 is allowable to mitigate the extra tax burden that arises due to receipt of any sum, being paid as arrear or in advance resulting in increase in tax liability.

Relief u/s 89 is available in the following situations:

salary being received in arrears or advance;
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;
where the payment is in the nature of compensation received by the employee 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 and the same has not been claimed as deduction under other section;
where the payment is in the nature of commutation of pension;
where the payment is in the nature of family pension.

Basis of Calculation:

Calculate tax payable on total income, including the additional salary of the relevant previous year in which the same is received.
Calculate tax payable on total income, excluding the additional salary of the relevant previous year in which the same is received.
Find out the difference between the tax at (1) and (2)
Compute the tax on total income after excluding the additional salary in the previous year to which such salary relates.
Compute the tax on total income after including the additional salary in the previous year to which such salary relates.
Find out the difference between the tax at (4) and (5)
The excess of tax computed at (3) over the tax computed at (6) is the amount of relief admissible under section 89(1). No relief is, however, admissible if the tax computed at (3) is less than the tax computed at (6). In such a case the assessee-employee need not apply for relief.

We provide all types of ITR filing services. Please click here for more information on ITR filing and calculation of relief.

Please feel free to write to us at [info@taxmantra.com] or call us at +91 88208208 11.

A technology-first approach to compliance & advisory

One Stop Global Compliance Expertise – access to the right skills wherever and whenever needed

35+ years of core area specialization in Cross-over expertise - global tax and regulatory assistance

Technology Enabled – Well-established and adaptable information technology

Flexibility – Ability to upscale, downsize or curate as per the client’s requirement

Business focused solutions to drive growth