ITR filing: Income tax relief can be claimed on salary arrears, advance salary, family pension arrears, compensation on termination, etc
Income tax return (ITR) filing: The due date for ITR filing for the financial year 2022-23 or for the assessment year 2023-24 is 31st July 2023. However, it is advisable to file one’s income tax return as soon as possible as it would enable an earning individual to get ITR refund at earliest possible time. But, while filing ITR one needs to look at all possible income tax relieves, which includes salary arrears like advance salary, bonus, family pension arrears, compensation on termination, etc.
According to tax and investment experts, income tax is levied on an earning individuals total income received during the year. Under section 89(1) of the income tax act, if someone has received any past dues due to delay in payment, one can claim income tax relief on such payments. If someone someone is eligible for income tax relief on received salary arrears, then her or she can claim it in current year’s ITR by simply submitting Form 10E. It should be noted that Form 10E submission is mandatory to claim income tax relief on delayed payments.
Speaking on how salary arrears are taxed in India, Archit Gupta, Founder & CEO at Clear said, “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 change in taxation rules in the year of receipt is allowed as relief under section 89(1).”
On how advance salary is taxed, Sujit Bangar, Founder at Taxbuddy.com said, “If an employee receives an advance salary, it is taxable in the year of receipt. However, if the employee repays the advance amount in subsequent years, they can claim relief for the repaid amount in those years, subject to certain conditions.”
Sujit Bangar went on to add that income tax obligations are computed based on the total income received by a taxpayer during the financial year. In the event that the assessee has received a portion of their salary in arrears or in advance, or has obtained Family Pension in arrears, the provisions of section 89(1) of the Income Tax Act enable them to claim tax relief. Filing Form 10E is a requirement to avail benefits specified in section 89(1). You can conveniently submit this form electronically through the income tax e-filing portal.
On what does income tax relief under Section 89(1) mean for an income taxpayer, Archit Gupta of Clear said, “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 delay in payment to you. 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 tax relief for delayed salary received in the form of arrears or received a family pension in arrears,” Archit Gupta of Clear concluded.
Source: https://www.livemint.com/money/personal-finance/itr-filing-how-to-claim-income-tax-relief-on-advance-other-salary-arrears-11687569541772.html
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