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# Relief when salary or family pension has been received in arrears or in advance – Section 89(1)

Relief is allowed under section 89 to a salaried person when

2. Salary or family pension is received in arrears

and income is assessed at a rate higher at which it would otherwise have been assessed.

For eg – A person’s salary is rs. 4,00,000 in year 2014-15 and rs. 5,00,000 in year 2015-16. Now his salary is increased by company from past date 1.4.2014 so he receives rs. 1,00,000 in 2015-16. This rs. 1 lakh is to be added in taxable income for year 2015-16. So his taxable income becomes rs. 6 lakh for 2015-16 and now he falls in 20% tax bracket. If the salary is received in 2014-15 itself then he remains in 10% tax bracket. Therefore relief is provided in this section for this increased taxation rate.

Calculation of Relief

Step 1 – Calculate the tax payable on the total income, including the additional salary of the relevant previous year in which the same is received.

Step 2 – Calculate the tax payable on the total income, excluding the additional salary of the relevant previous year in which the same is received.

Step 3 – Find out the difference between tax at Step 1 and Step 2

Step 4 – Calculate the tax on total income after excluding the additional salary in the previous year to which such salary relates.

Step 5 – Calculate the tax on total income after including the additional salary in the previous year to which such salary relates.

Step 6 – Find out the difference between tax at Step 4 and Step 5.

Step 7 – Excess of tax calculated at step 3 over tax calculated at step 6 is the amount of relief admissible under section 89(1). No relief if the tax calculated at step 3 is lower than the tax calculated at step 6.