top of page
Tax Expert

File Your ITR now

FILING ITR Image.png

Form 10E Income Tax: How to Claim Tax Relief Under Section 89(1)?

Updated: Jan 26


How to Fill Form 10E to Claim Relief Under Section 89(1) of Income Tax

Imagine receiving arrears in the current year that were rightfully due in preceding years, leading to an inflated income for the present financial year and, subsequently, higher tax liabilities. To unravel this fiscal puzzle, Form 10E becomes a crucial instrument. This comprehensive guide serves you steering through the essential facets of Form 10E and empowering you to claim the rightful relief under Section 89(1)

 

Table of Content

 

What is Relief Under Section 89(1).

Section 89 of the Income Tax Act 1961 provides relief to taxpayers who receive arrears of salary or profits in lieu of salary in a particular financial year. This relief is designed to reduce the tax burden on individuals who might face higher tax liability due to the receipt of arrears.


Scenario:

Let's say an individual receives arrears of salary or profits in lieu of salary in a particular financial year, but these were due to them in earlier years. Due to the arrears, their income for the current year might appear higher than their usual income, and as a result, they could end up paying higher taxes.


Relief under Section 89:

To provide relief in such cases, Section 89 allows for the computation of tax on the total income, including the arrears, as if it had been received in the year to which it relates. Then, the difference between the tax calculated on the total income (including arrears) and the tax calculated on the income of the earlier year is determined.

This difference in tax is the relief granted under Section 89, and it is allowed to be deducted from the total tax liability of the individual for the current financial year in which the arrears are received.

To claim relief under Section 89, the taxpayer needs to fill out Form 10E and submit it to the income tax department.


What is Form 10E?

Form 10E is a form prescribed by the Income Tax Department of India for the purpose of claiming relief under Section 89(1) of the Income Tax Act, 1961. This form is used by taxpayers who have received arrears of salary or other income in a particular financial year, but such income was due in earlier years.


Purpose of Form 10E 

The primary purpose of Form 10E is to facilitate the computation and claim of relief under Section 89. As mentioned earlier, this relief is designed to mitigate the additional tax burden that might arise due to the receipt of arrears in a specific financial year.


Essential Insights into Form 10E

  • Mandatory for Relief Claims: If a taxpayer wants to claim relief under Section 89, it is mandatory to file Form 10E. Failure to submit the form may result in the denial of the relief.

  • Online Submission: In recent years, the process of submitting Form 10E has been streamlined, and taxpayers can now file it online through the Income Tax Department's official e-filing portal.

  • Details Required: The form typically requires details such as the taxpayer's personal information, PAN (Permanent Account Number), assessment year for which relief is claimed, details of arrears received, computation of tax as per normal provisions, and the computation of tax as per Section 89.

  • Acknowledgment: Once the form is successfully submitted, the taxpayer receives an acknowledgment, which should be retained for future reference.


Importance of Form 10E

Filing Form 10E is crucial in ensuring that the taxpayer is not unduly burdened with a higher tax liability in the year of arrears receipt. It allows for a more equitable calculation, considering the actual period to which the arrears belong.


Who should file Form 10E among taxpayers receiving arrears of income?