How to file Form 10E for claiming relief under section 89 in case of salary arrears

Under the Income Tax, total Income Tax liability is calculated on the total income earned during a particular Financial Year. However, if the income for the particular Financial Year includes an advance or arrear payment in the nature of salary, the Income Tax Act allows relief (u/s 89) for the additional burden of the tax liability. Section 89(1) of the Income Tax Act offers relief from receipt of income related to previous years in the current year for any change in taxation rates and laws. Tax is calculated according to the rates applicable in both the years i.e. year of accrual and year of receipt. Additional liability in the current year due to increase in the slab rate in the year of receipt is allowed as relief under section 89.

What is Relief under section 89?
There are instances when a person receives any part of his salary or profit in lieu of salary in subsequent years than the year in which it was due. To put this in simple words, it is income of a person in the nature of salary, which pertains to some of the previous year or years, but the same is received in later years. In this scenario, if the tax is calculated in the year of receipt, then it will be much higher than the tax which would have arisen to the person had it been calculated in the year of accrual.

As per section 89, relief will be granted from any additional tax burden due to delay in receiving income under section 89(1). In simple words, no additional taxes if it is because of a delay in receiving salaries and tax bracket was lower for the year in which the person was supposed to receive the money.

What is Form 10E?
The Income Tax Act u/s 89 provides relief to an assessee for any salary or profit in lieu of salary or family pension received by an assessee in advance or arrears in a Financial Year. This relief is granted as the total income assessed is at a rate higher than that at which it would otherwise have been assessed. Such relief can be claimed by furnishing particulars of your income in Form 10E.

It is mandatory to fill out Form 10E when an individual wants to claim tax relief under Section 89(1) of the Income Tax Act 1961. It is filed before filing of the Income Tax Return.

Who is required to file Form 10E?
Any individual who receives arrears of salary, arrears of family pension, salary in advance, gratuity, commutation of pension or compensation upon termination of employment is required to file Form 10E to claim the relief under section 89(1).

Form 10E – Annexures:

Based on the above mentioned eligibility to file the form, Form 10E has parts as mentioned following:

Annexure I	Arrears Salary / Family Pension received in arrears
Annexure II	Salary / Family Pension received in advance
Annexure III	Payment in nature of Gratuity in respect of past services
Annexure IV & V	Payment in nature of compensation from the employer or previous employer at or in connection with termination of employment after continuous service of not more than 3 years or where the unexpired portion of term of employment is also not less than 3 years.
Annexure VI	Commutation of pension

Procedure to file Form 10E:

Form 10E is to be filed online. However, you need to prepare the form based on the data available with you.

Under the TaxBase software, you have to follow the previous steps in order to prepare the amount of relief:

• On the home screen of Income details click on the Forms option and select the form no.10E.

• Upon opening of the form, select the options where arrears to be entered. Click on the Details option in the form.

• Select the Arrears option in the given table. Enter all the details related to such arrears.

• Details of tax amounts on income related to the year of arrears is to be entered in the given fields. This will automatically calculate the amount of relief to be granted under Section 89. This amount of relief will be reflected on the home screen of Income Details under relief section.

This will complete the process of preparing and calculating amount of relief in the software. Afterwards, the Form 10E is to be filed online before filing the income tax return. Software will redirect to the final form filing stage after entering all the required details automatically. The date of filing form is to be entered in the income tax return. E-verification process is to be completed in the same manner as it is done for filing income tax returns.

Conclusion:
Filing of Form 10E is mandatory for individuals wanting to claim relief from income tax under section 89. This is done to identify the tax difference due to delayed receipt of a particular salary or pension income. Relief from tax is granted in order to reduce the burden of additional tax payment on the individual for late receipt of the salary income. TaxBase provides the option for smooth filing of Form 10E as after manual entries in the software it verifies and automatically uploads the form on the income tax filing portal before filing of Income Tax return.