As a salaried individual, if you receive any advance salary or arrears, you may have to pay taxes on the total amount received. The Income Tax Department, however, protects you from any additional tax liability due to any delay in receiving income under Section 89(1). In other words, if you receive any portion of your salary in the form of arrears, you can claim tax saving under Section 89(1) on the same via Form 10E filing.
Under Section 89(1), you can avail of tax relief through recalculation of tax for both years (in which the arrears are received and the arrears pertain). The tax liability is adjusted after assuming that the arrears were received in the same year they were due.
It is mandatory to fill out Form 10E if you want to claim tax relief under Section 89(1) of the Income Tax Act 1961. This form is used by taxpayers who have received delayed salaries in the form of arrears in a particular year. Any arrears received are reflected in Part B of your Form 16.
10E Form of Income Tax is required for furnishing particulars of received income under Section 192(2A) and can be filed by a Government servant or any employee working in a company, cooperative society, university, local authority, institution, association, or body.
The following steps explain the process of how to fill Form 10E:
Log into your Income Tax e-filing account
Go to e-File and then Income Tax Forms
Select ‘FORM NO. 10E - Form for relief u/s 89’ under ‘Form Name.’
Select the Assessment Year (or AY) for which you need to file Form 10E of Income Tax (for example, select Assessment Year as 2023-24 if the arrears of salary you have received are for the Financial Year 2022-23
Select the Submission mode and click on ‘Continue’
Fill out the applicable details and click on the ‘Save Draft’ button
For the Arrears of Salary, please select Annexure-I* and fill out the details as applicable
Click on ‘Preview & Submit’ to review the details and then submit the Form
* Please note that the following Anexxtures are available under the page menu:
Annexure-I: For Arrears or Advance Salary
Annexure-II: For Gratuity (Past services over five years but less than 15 years)
Annexure-IIA: For Gratuity (Past services for 15 years or more)
Annexure-III: For Compensation on Termination of Employment
Annexure-IV: For Commutation of Pension
Rule 21A provides guidelines on calculating tax relief if you've received a pension or salary in arrears or advance, ensuring fair taxation over the applicable years.
Claiming relief under Section 89(1) of the Income Tax Act is contingent upon filing this form. The relief can substantially reduce your tax liability. However, if the 10E Form of Income Tax is not filed as mandated, the Income Tax Department may deny this benefit. Consequently, when you file your ITR without including Form 10E, you risk losing the tax relief under Section 89(1) despite being eligible for it. This oversight could also prompt the IT Department to issue a notice regarding non-compliance.
Thus, to safeguard against these outcomes and ensure you receive the rightful tax relief under Section 89(1), it’s important to complete and file the 10E Form Income Tax online before submitting your ITR. This ensures compliance with tax regulations and optimises your tax-saving opportunities.
Consider the following aspects while filling out Form 10E for claiming tax relief on salary arrears:
You must file the 10E Form of Income Tax online on the Income Tax Department website
If you had claimed tax relief in the previous financial year but did not file Form 10E, you would receive a notice from the Income Tax Department for non-compliance
You must file the 10E Form Income Tax online before filing your Income Tax Return.
While arrears on salary may pertain to earlier financial years, you must choose the Assessment Year in which you have received the arrears while filling out Form 10E.
You do not need to attach any copy of the Form submitted with your Income Tax Return (keep a copy, however, for your record)
While your employer may ask for confirmation once you have submitted Form 10E, it is not mandatory to provide this form to your employer.
Tax relief under Section 89(1) is also applicable for Family Pension received in arrears.
There is no tax relief under Section 89(1) for VRS (Voluntary Retirement Scheme) compensation if you have previously claimed tax exemption on the same under Section 10(10C)
Section 89(1) offers substantial relief to taxpayers who face the impact of receiving salary arrears that need to be accounted for in the current fiscal year. The financial impact is significant until you apply for relief under Section 89(1) of the Income Tax Act, 1961. The steps mentioned above will help you file and submit Form 10E online to claim tax relief under Section 89(1) of the Income Tax Act 1961. 10E Form of Income Tax must be filed if you wish to reduce your tax liability on the salary payments received as arrears.
If you have any issues, concerns, or doubts related to Section 89(1), Form 10E, or tax filing, you must consult an expert to ensure you file the Income Tax Return correctly without any hassles.
Arrears: Income received for a past period, not paid when due.
Section 192(2A): A provision of the Income Tax Act specifying tax treatment for employees receiving salary arrears or advance.
Gratuity: A lump sum payment made by an employer to an employee upon retirement or resignation as a form of appreciation for their service.
Voluntary Retirement Scheme (VRS): It is an employer’s offer to employees, typically older ones, to retire voluntarily, often with financial incentives.
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No, it is not compulsory to file Form 10E if you do not claim relief u/s 89(1) of the IT Act, 1961. Form 10E is specifically required only when claiming relief for arrears under this section.
You can save Income Tax on salary through various avenues, such as claiming deductions under Section 80C (for investments like PF, PPF, etc.), utilising exemptions like HRA and LTA, and opting for tax-efficient salary structuring to minimise taxable income.
The last date for filing the Form 10E claims is the same as filing the ITR during the assessment year specified by the government of India.
Form 10E can be filed online on the Income Tax Department's official e-filing portal or physically submitted at the designated Income Tax office. It's important to ensure all details are accurately filled in to claim relief under Section 89(1) of the Income Tax Act, 1961.
The Income Tax Department requires individuals to submit Form 10E for relief under Section 89(1). This section allows for recalculating taxes for the year the arrears were originally due and the year in which they were received, ensuring appropriate tax relief.
Section 89 of the Income Tax Act 1961 provides relief to taxpayers who receive salary arrears or advance salary. It ensures that taxes are computed at the average rate over the years to prevent higher taxation in the year of receipt. Taxpayers can claim this relief by filing Form 10E and their Income Tax Return.
Form 10E can be filled by the government servant or any employee working in a company, cooperative society, university, local authority, institution, association, or body.
