What is Form 10E and Section 89(1) Relief?

When you receive salary arrears, advance salary, or family pension arrears, your total income for the current financial year shoots up. Because income tax in India is calculated based on progressive tax slabs, this sudden increase in income might push you into a much higher tax bracket, causing you to pay more tax than you normally would have if the salary was paid in the correct year.

To save taxpayers from this extra burden, the Income Tax Department provides relief under Section 89(1). Form 10E is the mandatory form you must file on the Income Tax e-Filing portal to claim this relief.

How Does Our Form 10E Calculator Work?

Our free online Form 10E Calculator handles the complex Section 89(1) mathematical steps for you:

• Step 1: It calculates the tax on your current year's income, including the arrears.
• Step 2: It calculates the tax on your current year's income, excluding the arrears. The difference is the extra tax you are paying this year due to the arrears.
• Step 3: It then calculates what your tax would have been in the previous year (the year the arrears actually belong to) if you had received the money back then.
• Step 4: It finds the difference between the extra tax paid in the current year and the additional tax you would have paid in the past. If the extra tax in the current year is higher, the difference is allowed as tax relief under Section 89(1).

Make sure to keep your Form 16, arrear calculation sheet from your employer, and salary slips handy when calculating the exact relief amount.