Section 89(1) of the Income Tax Act offers relief from receipt of past income in the current year for any change in taxation laws. The relief is provided by recalculating the tax outflow on such arrears of income according to the taxation rules applicable in both the years, year of receipt and the year to which the income pertains. Any increase in the tax outflow due to an increase in slab rates in the year of receipt is allowed as relief under section 89(1).
What Is Relief under Section 89(1)?
Tax is calculated on your total income received during the year. If your total income includes any past dues paid in the current year, you may be worried about paying a higher tax on such arrears (usually, tax rates have gone up over the years). To save you from any additional burden of tax due to delay in receiving income, the tax laws allow a relief under Section 89(1). If you have received any portion of your salary in arrears or in advance, or you have received a family pension in arrears, you are allowed some tax relief under Section 89(1), read along with Rule 21A.
In simple words, you are saved from paying more tax because of the delay in payment to you.
You can read in detail about how to calculate relief under Section 89(1) – Here
What is Form 10E?
If an individual is eligible for tax relief on salary received in arrears or advance, he/she must file 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. Section 89(1) provides tax relief for delayed salary received in the form of arrears or received a family pension in arrears.
Who should file Form 10E?
An individual should file Form 10E if he/she has received the following income during the previous financial year:
- Arrears of salary
- Family pension in arrears
- Advance salary
- Gratuity
- Commuted pension
- Compensation on termination of employment
How to File Form 10E
Form 10E can be filed online. Here are the following steps to file Form 10E online –
Step 1: Log in to the e-Filing portal with your User ID and password.
Step 2: After you have logged in, click on the tab named ‘e-file’ and select the 2nd option ‘Income Tax Form’. Further, select ‘File Income Tax Forms’.
Step 3: Once you select ‘File ITR forms’, the below screen will appear with three options: (i) Person with Business/ Professional Income (ii) Person without Business/Professional Income (iii) Persons not dependent on any source of Income.
Step 4: Select the second option, Persons without Business/Professional Income. You will find the Form 10E link under this option.
Step 5: Select the assessment year for which you want to file Form 10E, you can select the Assessment year 2024-25 for Financial year 2023-24.
Click on continue, next screen will appear and proceed with ‘Lets get Started’.
Step 6: If you are filing Form 10E to claim relief on arrears of salary then you can select Annexure I or other relevant fields as applicable
Step 7 : Once you have filled up all the Schedule, You can proceed with filing of Form 10E
Income Tax Notice for Non-Filing of Form 10E
Starting from the Financial Year 2014-15 (The Assessment Year 2015-16), the Income Tax Department has made it mandatory to file form 10E if you want to claim relief under Section 89(1). Taxpayers who have claimed relief under Section 89(1) but have not filed form 10E have received an income tax notice from the Tax Department stating that – The relief u/s 89 has not been allowed in your case, as the online form 10E has not been filed by you. The furnishing of Online form 10E is required as per sec.89 of the Income Tax Act.
Important Points About the Form 10E
- Form 10E is mandatory for individuals claiming tax relief under Section 89(1).
- Form 10E cannot be downloaded and filed offline. It is completely online to be filled and submitted on the Income Tax portal.
- If a taxpayer has claimed tax relief under section 89(1) in the previous year but has not submitted Form 10E, he/she would receive a notice from the Income Tax Department for non-compliance.
- Taxpayers must file Form 10E online before filing their income tax return.
- The arrears on salary may pertain to earlier financial years, but taxpayers must choose the assessment year in which they have received the arrears while filling Form 10E.
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