How to File Form 10E for Tax Relief on Salary Arrears under section 89(1) of Income Tax Act 1961.
How to File Form 10E for Tax Relief on Salary Arrears under section 89(1)
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| File Form 10(E) for under section 89(1) |
As a salaried individual, if you receive any advance salary or arrears salary, you have to pay taxes on the total amount received as per rules. The Income Tax Department, however, protects you from paying any additional tax liability due to 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) of Income Tax Act on the same by filing Form 10E.
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Benifits of filling Income Tax Returns even you are not liable to pay taxes.
For Income Tax relief u nder Section 89(1), you can avail of tax relief through recalculation of tax for the previous financial years (in which the arrears are received and the arrears pertain to). The tax liability is adjusted after assuming that the arrears salery were received in the same year they were due. Then the excess tax payable in current year is adjusted accordingly.
Why Tax Relief under Section 89(1)?
As a taxpayer, the following types of arrears received are taxable in the same year in which they are received –
1) Salary Arrears
2) Advance salary
3) Family pension arrears
4) Commuted pension
5) Any Compensation received from your employer for termination of employment or service
6)Gratuity as per rules
However, you can reduce the additional tax liability due to any delays in receiving such income under Section 89(1) of IT Act.
What is Form 10E?
Form 10E is prescribed by Income Tax Authority as a mandatory to if you want to claim tax relief under Section 89(1) of the Income Tax Act 1961. Under Section 89(1) of the IT Act, you are eligible to claim tax relief for delayed salary received in the form of arrears. Any arrears salary or others payment received are reflected in Part B of your Form 16.
Form 10E is used 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, co-operative society, university, local authority, institution, association, or body.
How to File Form 10E?
The following steps clearly explain the process of filing the Form 10E –
1) Log into Income Tax e-filing account
2) Go to e-File & then go to Income Tax Forms
3) Select ‘FORM NO-10E (Form for relief u/s 89) under ‘Form Name.’
4) Select the Assessment Year (or AY) for which you need to file Form 10E (select Assessment Year as 2021-22, if the arrears of salary you have received are for the Financial Year 2020-21.
5) Select the Submission mode and click on ‘Continue.’ to proceed
6) Fill out the applicable data and click on the ‘Save Draft’ button
7) For the Arrears of Salary, select Annexure-I and fill out the details as applicable.
8) Click on ‘Preview & Submit’ to review the details & then submit the Form to complete the process.
The following Annexure are required to be filled for different types of income –
List of Annexure to file Form 10(E) to Tax relief under section 89(1) of Income Tax Act.
1) Annexure-I: For Arrears or Advance Salary
2) Annexure-II: For Gratuity Received(Past services over five years but less than 15 years)
3) Annexure-IIA: For Gratuity received (Past services for 15 years or more)
4) Annexure-III: For Compensation on Termination of employment
5) Annexure-IV: For Commutation of Pension.
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Important points to Consider While Filing Form 10E
Consider the following aspects while filling out form 10E for claiming tax relief under section 89(1)on salary arrears –
You must submit online Form 10E on the Income Tax Department website
If you had claimed tax relief in the previous financial year but did not file Form 10E, you must receive a notice from the Income Tax Department for non-compliance.
So you must file Form 10E online before filing your income tax return for current assessment year.
While arrears on salary may pertain to earlier financial year(s) , you must choose the correct Assessment Year in which you have received the arrear payment while filing Form 10E.
You do not need to attach any copy of the Form 10E submitted with your income tax return (keep a copy for personal record)
While your employer may ask for the confirmation, once you have submitted Form 10E, however, it is not mandatory to provide this Form to your employer also.
Tax rebate under Section 89(1) is also applicable for family pension received in arrears
The tax relief under Section 89(1) is not applicable for VRS (Voluntary Retirement Scheme) compensation if you have previously claimed tax exemption on the same under Section 10(10C).
The above mentioned steps will help you to file and submit Form 10E online to claim tax relief under Section 89(1) of the Income Tax Act. The Form 10E must be filed if you wish to reduce your tax burden on the salary/wages payments received as arrears. In case you have any issues, concerns, or doubts related to Section 89(1) or need clarity in Form 10E, or tax filing, you must consult CA /an expert to ensure that you file the income tax return correctly without any error.
With rare exceptions, if a loved one passes away and leaves you a life insurance payout, this income is often not taxed. There can be tax repercussions if you convert or cash in a life insurance policy you already possess. These payments are often not taxed if you obtain expedited benefits from your life insurance plan because you are terminally ill. If you use the money for long-term care and get it in monthly installments because you have a chronic illness, it could not be taxable income.
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