Introduction:

Salaried individuals may receive advance salary or arrears, necessitating taxes to be paid on the total amount received. However, the Income Tax Department safeguards employees from additional tax liabilities arising from delayed income under Section 89(1). In essence, if you receive a portion of your salary as arrears, you can claim tax relief under Section 89(1) using Form 10E.

Form 10E:

If an individual qualifies for tax relief on salary received in arrears or in advance, they must file Form 10E. It is compulsory to complete Form 10E when claiming tax relief under Section 89(1) of the Income Tax Act 1961. Section 89(1) offers tax relief for delayed salary received as arrears or a family pension received in arrears.

Relief under Section 89(1):

• Tax is computed based on your total income received throughout the year. If your total income encompasses any past dues settled in the current year, you might be concerned about facing higher taxes on such arrears (as tax rates typically increase over time). To prevent you from bearing additional tax burdens due to delayed income, tax laws offer relief under Section 89(1).
•  If you’ve received any part of your salary in arrears or in advance, or if you’ve received a family pension in arrears, you are entitled to some tax relief under Section 89(1) in conjunction with Rule 21A.It is based on the principle that taxpayers should pay tax on their income at the appropriate tax rate for the year to which the income relates.

Who Needs to File form 10E:

• An individual should file Form10E if they have received the following income during the previous financial year:
• Arrears of salary should be filed with Form10E.
• Family pension in arrears should be reported using Form10E.
• Advance salary should be accounted for with Form10E.
• Gratuity
• Commuted pension should be reported using Form10E.
• Compensation on termination of employment should be disclosed using Form 10E.

 Eligible for Tax Relief:

The following individuals are eligible to file Form 10E to receive relief on salary arrears:

• Government employees
• co-operative society Employees
• Employees of an educational institution are eligible.
• Employees of an association or body are eligible.

How to File Form 10E:

A taxpayer claiming tax relief under Section 89(1) of the Income Tax Act has to follow the prescribed procedure for filing Form 10E.

Step 1: Visit the official online portal of the Income Tax Department.

Step 2: Login your Income Tax e-filing account with your User ID, password and date of birth.

Step 3: Log in and go to the ‘e-File’ tab in the Dashboard, then select the ‘Income Tax Forms’ option.

Step 4: Enter your PAN on the next screen, and select ‘FORM NO 10E – Form for relief u/s 89’ in the dropdown menu labeled ‘Form name’.

Step 5: On the same screen, enter the relevant Assessment Year and click ‘Continue’. For example, if your salary balance covers the 2020-2021 fiscal year, the assessment year would be 2021-2022.

Step 6: On the following page, you’ll receive instructions on how to correctly fill out Form 10E online. Here, click on ‘Let’s Get Started’.

Step 7: For salary arrears, you need to select annexure-I and proceed to fill out the relevant details.

Step 8: You can fill the form as per the instructions and click on ‘Preview’ to review it before submitting.

Step 9: If you are prepared to submit, you can choose ‘Proceed to e-Verify’ at the bottom of the page. Following e-verification, you will receive an acknowledgment message confirming successful submission, along with the Transaction ID and Receipt Number.

Step 10: If you can’t complete the form in one session, you can click ‘Save Draft’ at the bottom of the page to save all the progress you made before exiting.

Step 11: By following the same procedure outlined above, you can retrieve the saved information and finish filling out the form.

Important Points About Form 10E:

• Form 10E is a requirement for persons claiming tax relief under section 89(1).
• If the taxpayer claimed tax relief under section 89(1) in the previous year but did not file a Form 10E, a notice of non-compliance will be obtained from the Income Tax Department.
• The arrears on salary may relate to earlier financial years, but taxpayers must select the assessment year in which they received the arrears when filling out Form 10E.
• Form 10E cannot be downloaded and filed offline; it must be completed and submitted entirely online through the Income Tax portal.
• Taxpayers must file Form 10E online before filing income tax returns.

Final Word:

To avoid unnecessary and excessive tax payments, it is crucial to submit Form 10E under Section 89(1) of the Income Tax Act. The proper procedure must be followed, and the form should be filed promptly to lessen your tax liability and alleviate concerns regarding salary arrears. However, before seeking tax exemption, ensure to verify your eligibility and accurately calculate the tax relief.