What is Section 89 relief?

Section 89 provides tax relief if you receive salary arrears or advance salary in the current year, which pushes you into a higher tax slab than you would have been in if the salary was paid in the correct year.

Is it mandatory to file Form 10E to claim Section 89 relief?

Yes. You must file Form 10E on the income tax portal before filing your ITR. If you claim the relief in your ITR without filing Form 10E, the tax department will reject the claim.

How to Claim Section 89 Relief for Salary Arrears

Received pending salary arrears this year? Don't pay higher taxes. Learn how to calculate and claim Section 89 relief to reduce your tax liability.

The Problem with Late Payments

Imagine your company finally pays out the pending salary arrears from two years ago. You receive a lump sum of ₹3 lakhs this year.

While the money is welcome, it creates a tax problem. Because income tax is calculated on the total salary received in the current financial year, this extra ₹3 lakhs might push you into a higher tax bracket (e.g., from 20% to 30%).

You end up paying more tax simply because your employer paid you late. This is where Section 89 comes to the rescue.

How Section 89 Relief Works

Section 89 ensures you are not penalized for receiving past dues in the current year. It recalculates your taxes to see what you would have paid if the arrears were received in the year they actually belonged to.

If the tax calculated in the past year is lower than the extra tax you are paying in the current year, the difference is granted to you as "Relief under Section 89."

The Calculation Process

Section 89 relief is simply the tax you overpaid because the arrears landed in one lump. The calculation involves these steps: 1. Calculate tax for the current year including the arrears. 2. Calculate tax for the current year excluding the arrears. 3. Find the difference (This is the extra tax you are paying this year). 4. Calculate tax for the past year(s) to which the arrears belong, including the arrears. 5. Calculate tax for the past year(s) excluding the arrears (This is what you actually paid back then). 6. Find the difference (This is the tax you should have paid back then).

If the amount in Step 3 is greater than the amount in Step 6, the difference is your Section 89 relief.

The Golden Rule: Form 10E

You cannot just subtract the relief amount in your ITR and be done with it. The Income Tax Department mandates that you must submit Form 10E online before filing your ITR.

Form 10E is where you show the department the exact math (Steps 1-6) proving you deserve the relief. If you claim the relief in your ITR but forget to file Form 10E, your ITR will be processed with a tax demand notice.

Section 89 relief is disallowed in full unless Form 10E is filed online before the ITR. Source: Income Tax Act Section 89 read with Rule 21A; CBDT mandatory e-filing of Form 10E since AY 2015-16.

What you should do

Get the year-wise break-up of the arrears from your employer
File Form 10E online on incometax.gov.in and note the acknowledgment number
Enter the relief figure in the Section 89 field of your ITR, matching Form 10E
File and e-verify only after Form 10E is submitted

Common mistake

Claiming the relief in the ITR but skipping Form 10E. The portal then strips out the relief and raises a demand for the difference plus interest.

Simplifying the Process

Calculating tax across multiple past years with different slab rates is incredibly tedious.

If your employer has already calculated the Section 89 relief and included it in your Form 16, you can simply upload your Form 16 to LastMinute ITR. We will read the relief amount and place it correctly in your tax return. However, you must still log into the government portal and submit Form 10E manually before filing.