Claim Tax Relief on Salary Arrears with Form 10E

Introduction

Consider a situation where you receive your salary or pension in arrears. In such circumstances, a major concern for you might be the change in your tax situation. A couple of these concerns may include you moving up the tax slab or tax rates becoming higher in that particular year when you receive arrears. To tackle this, there are tax laws in place to protect you from additional tax burdens which are caused due to delay in receiving income. These fall under Section 89(1) and can be directly claimed under income tax returns.

What is the importance of Form 10E?

The Income Tax Department has made it compulsory to file Form 10E to claim relief under Section 89(1). As per this section, tax relief will be provided by recalculating the tax for the two years- the year to which the arrears pertain and the year in which the arrears are received. The taxes are then adjusted under the assumption that the arrears were received in the year in which they were due.

How to File Form 10E?

Here are some important steps you should follow and things you should remember while filing Form 10E.

1. Form 10E is available on the website of the Income Tax Department and must be filed online. The website is www.incometaxindiaefiling.gov.in
2. To claim relief under section 89(1) filing of Form 10E is mandatory
3. Taxpayers who claim relief for the previous financial year but fail to file Form 10E receive a notice from the department for non-compliance
4. Based on nature of the amount received, appropriate annexure need to be selected while filing Form 10E
   For example, Annexure 1 for salary, Annexure 2 for gratuity, Annexure 3 for compensation on termination of employment, Annexure 4 for commutation of pension
5. Form 10E should be submitted before filing your income tax return
6. The assessment year to be chosen while filing Form 10E should be the year the arrears pertain to
7. The claim to tax relief by filing this form can be done at the time of submitting tax returns. It is not compulsory to submit it to the employer, though the employer may ask for confirmation of submission of the Form 10E
8. Acknowledgment of filed Form 10E is not required to be attached while filing Income tax return
9. The tax relief under Section 89(1) is also applicable for those who receive pension in arrears

If you receive arrears during the financial year, do remember and practice this important step during the filing of your returns.