Steps for Computation of Relief Available Under Section 89
Steps for Computation of Relief Available Under Section 89
•
Relief u/s 89 is available in case of arrears of salary.
•
It may
so happen that
if such arrears
of salary are taxed in the year to which
such arrears of salary pertain,
the resultant tax might
be lower than the tax actually paid by the employee on such arrears
of salary. Section
89 intends to provide relief
in such circumstances.
•
Relief u/s 89 shall
be calculated in the manner
given below:
Ø Step 1: Calculate tax liability for the previous year in which arrears of salary have been received including the amount of such arrears.
Ø Step 2: Calculate tax liability for the previous year in which arrears of salary have been received excluding the amount of such arrears.
Ø Step 3: Calculate the difference between Step 1 & Step 2 (Step 1 - Step 2). The difference so obtained is the tax on such arrears for the previous year in which such arrears have been received.
Ø Step 4: Calculate tax liability for the previous year to which arrears of salary pertain including the amount of such arrears.
Ø Step 5: Calculate tax liability for the previous year to which arrears of salary pertain excluding the amount of such arrears.
Ø Step 6: Calculate the difference between Step 4 & Step 5 (Step 4 - Step 5). The difference so obtained is the tax on such arrears for the previous year to which such arrears pertain.
Ø
Step 7: Calculate the difference between
Step 3 & Step 6 (Step 3 - Step
6). The resultant figure is the amount
of relief available u/s 89.
|
Computation of Relief Under Section 89 |
|
|
Relevant P/Y - Year of Receipt of Arrears of Salary: •
Tax on total income
(including arrears of salary) •
Tax on total income
(excluding arrears of salary) Tax
on arrears (difference b/w above figures) - (A) |
XXX (XXX) XXX |
|
Relevant P/Y - Year to Which Arrears of Salary Pertain: •
Tax on total income
(including arrears of salary) •
Tax on total income
(excluding arrears of salary) Tax
on arrears (difference b/w above figures) - (B) |
XXX (XXX) XXX |
|
Relief
Under Section 89 [(,4) - (B)] |
XXX |
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