This article would bring you the idea of filing a Income Tax Form 10E which is mandatory to claim Relief under section 89(1) for OROP, DL-33 & Pay Commission arrears. However we did not get the arrears till date except OROP. This article is to make our veterans conversant with the procedures.
Receiving salary or pension in arrears might change your tax situation. You may fear it's going to move you up a tax slab. Or tax rates may be higher in the year arrears are received as compared to the year to which they belong. To protect you from any additional tax burden, due to delay in receiving income, the tax laws allow a relief under Section 89(1). This relief can be directly claimed in your income tax return, if you have received any portion of your salary in arrears.
The Income Tax Department has made it mandatory to file Form 10E if you want to claim relief under Section 89(1). As per Section 89(1), tax relief is provided by recalculating tax for both the years; the year in which arrears are received and the year to which the arrears pertain. Your taxes are adjusted assuming arrears were received in the year in which they were due.
Let's understand this calculation in detail. Tax for the year in which arrears are received is calculated both inclusive as well as exclusive of arrears. The difference is the tax on additional salary, let's call it x. Now tax is computed for every year to which the arrears pertain- including as well as excluding arrears. The difference is arrived at, let's call it y. If x is more than y, relief is available to the taxpayer.
Here are some important things to remember while claiming relief on arrears:
Form 10E must be filed online on the Income Tax Department website www.incometaxindiaefiling.gov.in . Taxpayers who claimed relief last financial year but did not file Form 10E received a notice from the department for non-compliance. Your return is not processed until you submit this form.
You must submit Form 10E before filing your income tax return.
Many taxpayers are confused about which assessment year to choose while filing Form 10E. Arrears may pertain to earlier years, however, one has to choose the assessment year in which arrears have been received. For example, if arrears are received in financial year FY 2015-16, choose assessment year as AY 2016-17.
Form 10E has to be submitted online and no copy is required to be attached with your tax return. However, you must file and keep all documents safely in your records.
Your employer may ask for confirmation of submission of Form 10E before adjusting your taxes and allowing tax relief. It is not mandatory to submit this form to the employer. You can claim tax relief by filing this form at the time of submitting your tax returns.
Salary is usually taxable when it is due or when it actually received, whichever is earlier. Arrears are usually announced from a back date and therefore cannot be taxed when due.
Relief under Section 89(1) is also allowed to those who receive family pension in arrears. The calculation is the same as mentioned above. Do remember this very important step while filing your returns if you have received arrears during the financial year.
Income Tax Notice for non-filing of Form 10E
Starting income tax returns for financial year 2014-15 (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). Download Form 10E.
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 with the following lines –
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
How to file Form 10E
Form 10E can be filed online. Here are the steps to file Form 10E online –
- Login tohttps://incometaxindiaefiling.gov.in/with your User ID and password along with date of birth.
- After you have logged in, click on tab named ‘e-File’ and select ‘Prepare & Submit Online Form (Other than ITR)’
- The below screen shall appear. Select Form 10E from the drop down.
- Now select the Assessment Year for which you want to file Form 10E.
- The below screen shall appear with instructions on how to file Form 10E and you keep on clicking on the blue tabs and enter the relevant information.
CLICK HERE TO DOWNLOAD FORM-10 IN EXCEL FORMAT AND BELOW ARE THE STEPS INVOLVED IN COMPUTING THE TAX RELIEF.
First- spread out the amount of arrear or advance received over the specific financial year to which they relate and re-calculate the income tax for each year had the arrears been received during the concerned financial year itself.
Second-calculate incometax for each of the financial years without taking into account the arrear or the advance received.
Third- deduct the total of income tax arrived at 2 nd step from step-1.
Fourth-calculate incometax for the Financial year in which the arrear is received, including the arrears/advance received.
Fifth- calculate incometax for the Financial year in which the arrear is received, excluding the arrears/advance received.
Sixth- deduct income tax arrived at step-5 from income tax arrived at step-4
Seventh- deduct income tax arrived at step-3 from income tax arrived at step-6
The figure so arrived is the amount of the relief under section 89(1)