Recently Government has decided to pay salary as per 7th pay commission. Therefore it is very important to understand and learn how to get relief under Income tax act on arrear of salary.
Relief when salary is paid
in advance or
arrears [Sec 89(1)]
Calculation of relief is three step process:
Lets calculate!!
Step 1: Calculate tax payable of the previous year in which the arrears/ advance is received on
a) Total income inclusive of
additional salary
b) Total income exclusive of additional salary
The difference between (a) and (b) is the tax on additional salary included in the total income
Step 2: Calculate tax payable of the every
previous year to which the additional salary relate
a) On Total income including additional salary of that particular previous year
b) On Total income exclusive of additional salary
Calculate the difference between (a) and (b) for every previous year to which the additional salary relates and aggregate the same.
Step 3: The excess between the tax on additional salary as calculated under step 1 and 2 shall be the relief admissible under Section 89(1). If the tax calculated in step 1 is less than tax calculated in step 2, the assessee need not apply for relief.
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