How To Claim Tax Relief On Salary Arrears Under Section 89

How to Claim Tax Relief on Salary Arrears Under Section 89?

Section 89(1) enables taxpayers to claim relief for past income by recalculating taxes for both the year of receipt and the original year.

Written by : Knowledge Centre Team

2025-12-18

4389 Views

11 minutes read

Exit Pop Up

Live Life More Confidently

Get best insurance from our experts

Name is required Name should be Valid
Mobile Number is required Mobile Number should be Valid
DOB is required DOB should be Valid
Annual Income is required
Please tick to proceed further.

Thank you for your interest in our product. Our financial expert will connect with you shortly to help you choose the best plan.

Once an employee gets an increment, the next thing he or she looks forward to is receiving the arrears. While receiving them can feel like a welcome boost, it often brings new regulations to be aware of during tax filing. Since arrears are added to your income for the year in which you receive them, they may push you into a higher tax bracket. Here, Section 89 offers you a relief so you are not unfairly taxed for income that actually belongs to earlier years.

Let's understand more about this relief, how to claim it, and maximise tax savings to ensure your return accurately reflects your earnings.

Key Takeaways

  • Section 89 provides tax relief when an individual receives salary arrears, advance salary, or pension arrears

  • Relief applies when arrears belong to the previous financial year, and the taxpayer is a salaried person or a pensioner

  • The tax liability is recalculated as if the arrears were received in the respective years

  • Filing Form 10E through the Income Tax e-filing portal is essential for claiming relief

  • Ensure Form 10E is filed correctly during ITR submission, and documentation of salary slips and Form 16 is accurate

What is Arrear Salary and its Impact on the Income Tax?

Arrear salary refers to the portion of your earnings that is paid to you later than its scheduled date. This usually happens when salary revisions, increments, promotions, or pay corrections are applied with retrospective effect. 

The advance or arrears received from an employer affect your taxes and are reflected in the year of receipt. Relief under Section 89(1), according to the Income Tax Act, saves you from additional tax burden if there is a delay in receiving income.

An employee must meet certain conditions to claim relief under this section. To start with, Section 89 reliefs can be claimed on any of the following received during a particular year:

  • Salary received in arrears or in advance

  • Premature withdrawal from the Provident Fund

  • Gratuity

  • Commuted value of pension

  • Arrears of family pension

  • Compensation on termination of employment

What is Section 89 of the Income Tax Act?

When income is paid later than expected or received in advance, it often changes the natural flow of taxation. Section 89 provides clarity in such situations. It allows you to adjust your tax fairly and reasonably. Let us understand in detail what Section 89 of the Income Tax Act entails: 

  • Overview of Section 89: Section 89 of the Income Tax Act provides tax relief when an employee receives salary arrears, advance salary, or any other delayed income. Since such payments may push the taxpayer into a higher tax bracket, this section ensures that the additional tax burden is distributed over the years to which the income actually pertains.
  • Importance of Section 89 for Tax Savings: Claiming relief under Section 89 helps reduce excess tax liability caused by a sudden spike in taxable income due to arrears. Without this relief, individuals may pay more tax than necessary, which can be unfair when the income relates to previous financial years with potentially lower tax rates.
  • Salary Relief under Section 89(1) of the Income Tax Act: Tax is calculated on your total income earned or received during the financial year. If you have received a portion of your salary ‘in arrears or in advance’ or received a Family Pension in arrears, then you may be worried about paying higher taxes on such an amount. Tax liabilities for a taxpayer are calculated from the income earned during that financial year. This income can include past dues paid in the current year. Tax rates increase over the years, and thus, you may have to pay higher taxes in such cases.
    Under this condition, the Income Tax Act allows you to claim a tax rebate under Section 89(1). Thus, you do not have to pay more in case of a delay in payments to you.

Unlock Tax Savings Instantly

Please enter correct name Please enter the Full name
Please enter valid mobile number Please enter Mobile Number
Please enter valid email Please enter Email
Consent is required

Enter OTP

An OTP has been sent to your mobile number

Didn’t receive OTP?

Application Status

Name

Date of Birth

Plan Name

Status

Unclaimed Amount of the Policyholder

Name of the policy holder

Policy Holder Name

Policy No.

Policy Number

Address of the Policyholder as per records

Address

Unclaimed Amount

Unclaimed Amount
Error

Sorry! No records Found

Request Registered

Thank You for submitting the response, will get back with you.

Complaint Registered

.  Please use this ID for all future communications regarding this concern.

Request Registered

Thank You for submitting the response, will get back with you.

Thank you for your interest in our product. Our financial expert will connect with you shortly to help you choose the best plan.

Sorry

Claiming Relief under Section 89

As per Section 89(1), tax relief is provided by recalculating tax for the year in which arrears are received and the year to which the arrears pertain, and the taxes are adjusted in the year in which they were due. You can claim relief under Section 89 by submitting Form 10E. It has to be filed online at the Income Tax Department's e-filing portal.

Note: Form 10E has to be filed before filing the Income Tax Return.

  • Conditions for Claiming Relief: You need to meet a few basic requirements for your claim to be considered valid. These conditions ensure that the benefit is granted only in genuine cases where income was taxed unevenly due to timing.

    To claim tax relief under Section 89:

    1. The arrears must pertain to a previous financial year.
    2. The taxpayer must be a salaried individual or pensioner.
    3. Form 10E must be submitted before filing the income tax return.
    4. The relief applies only to income tax and not to other deductions like PF or professional tax.

How Does Section 89 Work?

When you receive arrears or advance salary, your taxable income for that year increases, leading to a higher tax liability. Section 89 helps reduce this burden by spreading the income across the years to which it actually pertains. Instead of paying tax on the entire amount in the year of receipt, the tax is recalculated as if the income had been received in the relevant years.

However, to avail of this relief, you must:

  • Include the tax computation details in your income tax return for the year you received the payment

  • File Form 10E online through the Income Tax Department’s portal before submitting your return

Step-by-Step Explanation of How to Determine Relief in Income Tax:

Before you begin, it helps to look at your income flow with a clear timeline so the comparison becomes easier to follow. The following approach ensures you understand how the arrears impact your overall tax load and why the relief calculation matters:

  1. Compute the total tax liability for the year when arrears were received

  2. Calculate tax liability as if the arrears were received in the year(s) they pertain

  3. The difference between the two tax amounts determines the relief available under Section 89

Tax Computation in Different Scenarios:

It is important to examine how your income shifts over time, as every change can affect your final tax outgo. By comparing the following two situations, you can get a clearer view of when relief works in your favour and the need for adjustment:

  • If the arrears push the taxpayer into a higher tax slab, Section 89 helps distribute the tax burden

  • If the previous year’s tax rates were lower, the relief calculation ensures a fair tax adjustment

trivia-img

Did You Know?

Failing to file Form 10E before claiming relief under Section 89(1) may lead to the denial of benefits and a tax notice. 


Source: Incometax

ytp 1 cr

Eligibility Criteria for Claiming Relief u/s 89

Understanding each requirement clearly helps you avoid compliance gaps and claim the relief with confidence. To qualify for claiming relief under section 89, you have to meet the following conditions:

  1. Indian Resident: The taxpayer should have indian citizenship during the relevant assessment year.

  2. Retirement benefits account: The retirement savings account must be in a country recognised by India for this purpose.

  3. Residency Status at account opening: For NRIs, to claim relief under Section 89A, you must have been an NRI at the time you opened the retirement account abroad, and resident in that foreign (notified) country.

  4. Foreign Taxation: The income earned from the retirement account must be taxed by the country. Taxation should be on a withdrawal basis, and not on accruals or earnings.

How to Calculate Tax Relief under Section 89(1) on Salary Arrears?

Now that you know what Section 89 of the Income Tax Act is, let’s understand how to calculate your tax relief on the salary arrears.

Here is a step-by-step guide that you can follow:

  • Calculate tax payable on the total income, including additional salary, arrears or compensations, in the year it is received

  • Calculate tax payable on the total income, excluding any additional salary, in the year it is received

  • Subtract the calculation derived from Step 2 from the total salary calculation from Step 1

  • Calculate tax payable on the total income, excluding arrears, for the year to which the arrears relate

  • Calculate tax payable on the total income, including arrears, for the year to which the arrears relate

  • Now, calculate the difference between Step 4 and Step 5

  • The excess of the amount at Step 3 over Step 6 is the tax relief that will be allowed to you, while in case the amount in Step 6 is more than the amount in Step 3 no relief will be allowed

Click here to use - Income Tax Calculator

Year of Arrears vs. Year of Receipt:

The year of arrears refers to the year to which the unpaid salary originally belongs, while the year of receipt is the year in which that delayed salary is actually paid to you. This distinction matters because receiving past income in a later year can increase your taxable income for that year and potentially push you into a higher tax slab. Under Section 89, tax is recalculated for both years to ensure you are not unfairly taxed simply because the payment was delayed.

Tax Relief Calculation Process:

The calculation process allows you to see how your tax outcome shifts when arrears are added or removed from each year’s income. Here's how the final relief amount is balanced for a fair outcome in your situation:

  1. Calculate tax liability with and without arrears for the current year

  2. Calculate tax liability with and without arrears for the relevant previous years

  3. The difference in tax amounts determines the relief under Section 89

Illustration of Relief Under Section 89 with an Example:

Consider an individual who received ₹1,00,000 as arrears in FY 2023-24 for work done in FY 2020-21. By recalculating the tax for both years, the relief is determined as the excess tax paid in the current year minus the adjusted tax liability of the previous year.

Filing Form 10E for Tax Relief

Knowing Form 10E and how to fill it ensures your claim is backed by the correct information and recorded properly before your return is processed. It also helps the tax authorities verify your arrears details with clarity and accuracy.

Now, let us look at the relevance of Form 10E in tax relief:

  • Importance of Form 10E: Form 10E is mandatory for claiming tax relief under Section 89. Without filing this form, the relief may be denied, even if eligible. Key Features of Form 10E:
    1. It must be filed online via the Income Tax Department's website
    2. No physical submission is required
    3. Details of arrears and their respective financial years must be provided
  • Documentation Required for Form 10E: When filing Form 10E, there are several supporting documents required to back up your claims and present your case as a genuine one. The following are a few essentials you must know about:
    1. Salary slips or employer-provided arrears breakup
    2. Previous years' tax returns (for accurate computation)
    3. Any supporting documents related to salary revisions
  • Common Mistakes to Avoid: Often, even small mistakes can lead to significant losses in tax savings. Ensure that you don’t make the following common mistakes when dealing with Form 10E:
    1. Filing Form 10E after submitting the tax return
    2. Entering incorrect arrear details
    3. Failing to retain proof of arrears received

5 Things to Remember when Claiming Relief on Arrears

When claiming relief on arrears under Section 89 of the Income Tax Act, there are numerous things that you must consider for an easy and error-free application.

Here’s a list of five things that you must keep in mind:

  1. Form 10E must be filed online. All taxpayers who claimed relief in the last financial year but did not file Form 10E will receive a notice from the Income Tax department for non-compliance; however, your return will not be processed until you submit the form.

  2. Salary is usually taxable when it is due or when it is received, but in the case of arrears, it is usually announced from a back date, which is why it cannot be taxed when due.

  3. Submit Form 10E before filing your ITR. When it comes to choosing the assessment year for arrears, you must choose the assessment year in which the arrears have been received. For example, if arrears were received in FY 2017-18, the assessment year shall be AY 2018-19.

  4. A copy of Form 10E is not required to be attached to your tax return. However, you must file and keep all documents in your records.

  5. Your employer may ask for confirmation of the submission of Form 10E; however, it is not necessary to submit this form to the employer.

Steps to File Form 10E and Complete Your Claim Submission

This form is required to furnish details of the income received under section 192(2A). The income tax department has made it compulsory to fill out Form 10E to avail of and claim relief under Section 89(1) regarding salary arrears. The Government has directed that this form be filed before filing the income tax return.

You can fill out the form yourself by following a few simple steps:

Step 1: Log in to the income tax filing site and click the link below to access the filing website.

Link: https://www.incometax.gov.in/

Step 2: Click on the ‘Login’ button located at the top right corner. Enter the particulars that are required by the site:

  • User ID (PAN No. or AADHAR No.)

  • Password

Step 3: After logging in, click on the E-file tab---> ‘Prepare and submit the online form’(Can be found in the drop-down menu)

Step 4: Click on the drop-down list of FORM NAME

Step 5: Find Form 10E and click on it. Choose the assessment year and click on the ‘Continue’ button.

Step 6: Please select the applicable items from the list of annexures.

Step 7: Check for the personal details, click on the ‘save’ button, and save your selected annexure

Step 8: Enter the total income, arrear income, etc.

Step 9: Verify the entered details. Click on save and then proceed.

What Supporting Documents are Required for Claiming Tax Relief?

  • Salary slips with an arrears breakdown

  • Form 16 from the employer

  • Previous years' ITR for reference

  • Form 10E acknowledgement

  • Any correspondence with the employer regarding arrears

Wrapping Up

Understanding and claiming tax relief on salary arrears under Section 89 of the Income Tax Act is crucial for taxpayers facing delayed income payments. This provision alleviates the additional tax burden that may arise when income, such as salary arrears or gratuity, is received after its due date. By recalculating taxes for the relevant years and adjusting them accordingly, Section 89(1) ensures fairness in tax assessment. For more detailed guidance and assistance, you can consult with a tax professional to ensure compliance and maximise your tax benefits under Section 89(1).

Glossary

  1. Arrears of Salary: Money received later for work done in earlier years that was not paid on time, and can change your tax liability
  2. Gratuity: Employment benefits as a token of gratitude for their services, and the amount is eligible for relief under Section 89
  3. Form 10E: Form required to claim relief under Section 89(1), which needs to be filed online before submitting the income tax return
  4. Compensation on Termination: The lump sum payments received due to the termination of employment
glossary-img
Uncertain About Insurance

FAQs Related to Tax Relief Under Section 89

Yes, you can claim the relief by providing details related to your arrears at the time of filing the return, even if it is not mentioned in Form 16.

The government, to avoid the problem of over-taxation due to advances or arrears of salary, allows you to claim a tax relief u/s 89. Form 10E is required to claim this relief.

There can be times when you do not receive your salary on time. You may receive your salary later or maybe earlier than the due date. According to the Income Tax Act, salary is taxed in the year in which it is received. In a case when you have received a salary that was due the previous year, in this FY, then it can unnecessarily increase your tax liability.

The Income Tax Department has made filing Form 10E compulsory to claim the tax relief u/s 89. This has been applicable since FY 2014-15. While filling out the form, you have to choose the relevant Assessment Year (AY). Assessment year or AY is the immediate next financial year after the financial year for which you have to pay taxes. While filing Form 10E, choose the Assessment Year in which you received your arrears. For example, if you have received arrears in the FY 2025-26, then your AY will be the following year, i.e., 2026-27.

No, you do not need to attach a copy of Form 10E along with your tax return statement. Form 10E is available online and can be filled out on the income tax filing website itself. So, once you have filled out the form, you do not need to attach it to your Income-tax return. Income tax does not require any annexures. However, you are advised to keep your documents safe so you can submit them if the need arises in the future.

Section 89(1) offers relief when income, such as salary, pension, or other dues, is received late. It adjusts your tax by comparing what you paid in the year of receipt with what you would have paid had the income been taxed in the correct year.

Form 10E should be filed before submitting your income tax return for the year in which you received the arrears. Filing it in advance ensures your relief is accepted without any processing issues.

The relief is calculated by comparing the extra tax you paid due to arrears in the current year with the tax that would have applied had those arrears been taxed in the original year. The difference becomes your eligible relief.

Yes, relief can be claimed on these payments if they relate to earlier periods and change your tax slab in the year they are received. The calculation follows the same year-wise comparison process.

You generally need salary slips with arrear details, Form 16, previous years’ income tax returns for reference, the acknowledgement of Form 10E, and any employer communication explaining the arrears.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

Recent Blogs

Dividend Tax Explained: Dividend Distribution Tax in India
18 Feb '26
1106 Views
8 minute read
Understand what dividend distribution tax(DDT) is, how dividend tax works in India, who pays dividend tax, and how it is taxed under income tax laws.
Read More
Tax Saving
Income Tax Act 1961: Overview, Key Provisions and Applicability
17 Feb '26
1176 Views
12 minute read
Learn about the Income Tax Act 1961, its purpose, key provisions, applicability, and how it governs income tax laws in India.
Read More
Tax Saving
Types of Allowances in Salary: Definition, and Taxation Rules
11 Feb '26
1206 Views
6 minute read
Learn about various allowances like HRA, travel, medical, and special allowances, and understand their tax treatment and exemptions to optimise salary taxation.
Read More
Tax Saving
Penalty for Late Filing of Income Tax Returns (ITR) in 2026
11 Feb '26
1133 Views
7 minute read
Avoid penalties for late ITR filing! Learn about the financial and legal implications of missing deadlines and how to file on time.
Read More
Tax Saving
HUF Taxation Explained: Benefits, Rules & How to Save Tax
11 Feb '26
111 Views
7 minute read
Learn how HUF taxation works in India, eligibility rules, tax benefits, deductions, and how Hindu Undivided Families can save income tax legally.
Read More
Tax Saving
What is IGST? Meaning, Rates and Calculation Explained
11 Feb '26
210 Views
7 minute read
Understand IGST, its full form, when it applies, current rates, and how to calculate Integrated GST for inter-state transactions in India.
Read More
Tax Saving
What is CGST? Meaning, Rates & Features Explained
11 Feb '26
160 Views
7 minute read
Learn what CGST means, its full form, key features, tax rates, and how Central GST is applied under India’s GST framework.
Read More
Tax Saving
Income Tax Rebate in India: Rules, Limits and Eligibility
10 Feb '26
1938 Views
8 minute read
Get money back with Income Tax Rebate! Learn what an income tax rebate is, who is eligible, applicable sections, limits, and how taxpayers in India can claim the rebate.
Read More
Tax Saving
Tax Collected at Source (TCS): Payment, Exemption & Rates
10 Feb '26
1059 Views
7 minute read
Learn about Tax Collected at Source (TCS), payment exemptions, and rates. Explore key details with Canara HSBC Life Insurance for smarter tax planning insights.
Read More
Tax Saving

Tax Savings - Top Selling Plans

We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.

Family Shield: Enhanced Protection

iSelect Smart360 Term Plan
  • 3 Plan options
  • Life cover till 99 years
  • Steady income benefit
  • Block your premium at inception

Fixed Returns, Zero Risks & Worries

iSelect Guaranteed Future Plus
  • 4 Plan options
  • Life cover + Guaranteed benefits
  • Accidental death benefit
  • Premium protection cover

Start Young, Pay Less, Stay Secured

Young Term Plan
  • Life cover till 99 years
  • Coverage for spouse
  • Block your premium rate
  • Covers 40 critical illness