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Salary arrears are normally taxable in the year in which they are received. Receiving several years’ salary in one year may push the taxpayer into a higher tax slab. Section 89 provides relief by comparing the additional tax in the year of receipt with the tax that would have arisen if the arrears had been taxed in the years to which they relate.
Important 2026 form mapping
For the return of FY 2025-26 / AY 2026-27, use Form 10E and claim relief under Section 89 of the Income-tax Act, 1961. Form 39 does not replace Form 10E for AY 2026-27. Form 39 applies to income governed by the Income-tax Act, 2025 from Tax Year 2026-27 onward.
When can Section 89 relief be claimed?
Relief may be available where the bunching of income results in a higher tax burden because the taxpayer receives:
- salary in arrears or salary in advance;
- salary relating to more than twelve months in one year;
- arrears of family pension;
- taxable gratuity for past service;
- eligible compensation on termination of employment; or
- taxable commuted pension.
Relief is available only to the extent the prescribed calculation produces a positive amount. It is not a deduction from salary or total income; it is a reduction from the tax otherwise payable. No relief is available for an exempt portion of a receipt. A taxpayer cannot claim both the voluntary-retirement exemption under Section 10(10C) and Section 89 relief for the same qualifying compensation.
Section and form mapping under the two laws
| Subject | Income-tax Act, 1961 | Income-tax Act, 2025 | Effective application |
|---|---|---|---|
| Relief provision | Section 89 | Section 157 | Section 89 applies up to FY 2025-26; Section 157 applies from Tax Year 2026-27 |
| Computation rule | Rule 21A | Rule 73 | Apply the rule governing the year of receipt |
| Prescribed form | Form 10E | Form 39 | AY 2026-27 requires Form 10E; Form 39 applies from Tax Year 2026-27 |
How is relief on salary arrears calculated?
Relief formula
A. Additional tax in the year of receipt = tax including arrears minus tax excluding arrears.
B. Additional tax for the earlier year or years = tax after adding the relevant arrears minus tax before adding them.
Section 89 relief = A minus B, but only when the result is positive.
Illustrative computation
Assume an employee receives salary arrears of ₹3,00,000 during FY 2025-26. The entire arrear relates to FY 2023-24. The old tax regime is assumed to have been validly applicable in both years. The figures below ignore surcharge and cess only to explain the method.
| Calculation | Taxable income | Income-tax |
|---|---|---|
| FY 2025-26 including arrears | ₹14,00,000 | ₹2,32,500 |
| FY 2025-26 excluding arrears | ₹11,00,000 | ₹1,42,500 |
| Additional current-year tax | — | ₹90,000 |
| FY 2023-24 after adding arrears | ₹10,00,000 | ₹1,12,500 |
| FY 2023-24 before adding arrears | ₹7,00,000 | ₹52,500 |
| Additional earlier-year tax | — | ₹60,000 |
| Relief under Section 89 | ₹90,000 minus ₹60,000 | ₹30,000 |
The actual calculation must use the tax regime, slab rates, rebate, surcharge, cess, deductions and exemptions legally applicable to each relevant year. Where arrears relate to several years, the arrears must be allocated year-wise and the earlier-year differential must be calculated separately for each year.
When should Form 10E be filed?
- For AY 2026-27, file Form 10E electronically on or before the applicable return-filing due date under Section 139(1).
- As a practical filing sequence, submit and e-verify Form 10E before filing the ITR.
- If relief is to be considered by the employer while deducting TDS, provide the prescribed particulars to the employer sufficiently early.
- Keep the Form 10E acknowledgement and the year-wise arrears calculation.
Do not claim relief without filing the prescribed form
If Section 89 relief is claimed in the ITR without filing Form 10E, the return may be processed but the relief can be disallowed through an intimation under Section 143(1).
How to file Form 10E online
- Log in to the Income Tax e-Filing portal using your PAN and password.
- Go to e-File > Income Tax Forms > File Income Tax Forms.
- Search for Form 10E under forms governed by the Income-tax Act, 1961.
- Select the same Assessment Year for which the ITR is being filed.
- Select the applicable receipt, such as arrears salary or family pension.
- Enter the year-wise arrears, total income and tax details for the year of receipt and the earlier year or years.
- Review the system calculation. Ensure the tax regime and tax figures used for each year are correct.
- Preview, e-verify and submit the form.
- Save the acknowledgement and claim the same eligible relief amount in the ITR.
Documents and records to keep
- employer’s arrears statement showing the year-wise break-up;
- Form 16 for the year of receipt and relevant earlier years;
- salary slips, pension orders or revised pay-fixation order;
- earlier ITRs and tax computations;
- Form 26AS and AIS, where relevant;
- Form 10E acknowledgement; and
- working showing the tax differential for every relevant year.
Form 39 under the Income-tax Rules, 2026
For income governed by the Income-tax Act, 2025, the corresponding provision is Section 157 and the prescribed form is Form 39 under Rule 73. Form 39 contains structured tables for additional salary, gratuity, retrenchment compensation and commutation of pension.
Rule 73(3) requires Form 39 to be furnished on or before the applicable return-filing due date under Section 263(1)(c). One departmental FAQ states that no time limit is prescribed and advises filing early; however, the notified rule expressly contains a due-date requirement. Taxpayers should follow the notified rule and file Form 39 within the statutory deadline. Once Form 39 is verified and submitted, the departmental FAQ states that it cannot be edited.
Common mismatch reasons and how to resolve them
| Mismatch | Resolution |
|---|---|
| Form 10E not filed | File and e-verify the correct form before submitting the ITR. If the ITR has already been filed and is still revisable, file the correct form and submit a revised ITR within the permitted time. |
| Wrong Assessment Year selected | The Assessment Year in Form 10E must match the ITR year. Do not use Form 39 for AY 2026-27. |
| Relief in ITR differs from Form 10E | Reconcile the arrears amount, year-wise allocation, total income, applicable regime and tax figures. Claim only the eligible amount supported by the form. |
| Portal tax differs from personal calculation | Check whether the portal has applied the default new regime, while the taxpayer validly used the old regime. Verify the tax applicable for each year before submission. |
| Relief disallowed in Section 143(1) intimation | Read the adjustment reason. If the form was correctly filed and the return contained correct particulars, use Services > Rectification > New Request and select the appropriate reprocessing or correction option. If the ITR itself was wrong and revision is still available, use a revised return instead of rectification. |
Keep evidence ready for mismatch resolution
Preserve the Form 10E acknowledgement, Section 143(1) intimation, employer’s arrears break-up, Form 16, earlier-year computations and the detailed relief working. A rectification request should be used only for a mistake apparent from the record; it is not a substitute for a revised return or a fresh claim that was never made correctly.
Practical takeaways
- Include the full taxable arrears in salary income for the year of receipt.
- Allocate the arrears to the correct earlier year or years.
- Use the tax rates and regime applicable to each year.
- For AY 2026-27, file Form 10E—not Form 39.
- Submit the prescribed form before the ITR and within the statutory due date.
- Ensure the relief claimed in the ITR matches the supported computation.
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Comments
3 comments
My father retired in 2006. From 2006 to 2016, until he passed away, he was underpaid his pension by his employer. Finally in 2020 the employer admitted to the mistake and paid the entire arrears of ten years in one lump sum which amounted to the highest tax bracket of 30%, which was deducted at source. In the early years, his annual arrears were not even in the taxable bracket, but taken together for ten years, it was in the 30% bracket. My questions : 1) is it legal to impose the tax on an income which should have been received 14 years ago ? 2) is it possible to recover the tax deducted ?
Whether employer can allow relief us 89.1 while paying arrears.
My name is swapnil I got arrears .on this year I submitted frm 10(e)but they cut my tax Ani they submitted 2 income tax office...they don't give me relief from 10 e
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