Relief U/S 89(1) for Arrears of Salary

RELIEF U/S 89(1)

In case of relief when salary has been received in arrears or in advance:

Method of calculating the relief:

1. Calculate the tax payable on the total income, including the additional salary of the relevant previous year in which the same is received. (receipt basis).
2. Calculate the tax payable on the total income, excluding the additional salary of the relevant previous year in which the same is received. (receipt basis).
3. Find out the difference in tax between (1) and (2) as calculated above.
4. Compute the tax on the total income after excluding the additional salary in the previous year to which such salary relates. (accrual basis).
5. Compute the tax on the total income after including the additional salary in the previous year to which such salary relates. (accrual basis).
6. Find out the difference in tax between (4) and (5) as calculated above.
7. The excess of tax computed at (3) over the tax computed at (6) is the amount of relief admissible u/s 89(1). No relief is however admissible if the tax computed at (3) is less than the tax computed at (6). In such a case the assessee – employee need not apply for relief.