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Relief u/s 89: Calculation of Relief Under Section 89(1)

If you received any portion of salary in arrears or on advance or received profit in lieu of salary, you
can claim relief u/s 89 (1).
Salary in arrears or advance, received in lump-sum is liable to tax in the year of receipt. Some relief is
however allowed from tax on such receipts. Claimin of relief is optional and should be claimed only
when it is advantaeous to the claimant. !ou can also claim relief u"s #$ (1), if you are not liable to tax
and have not been taxed in the previous years.
%he relief u"s #$(1) has to be ranted in accordance with the provisions contained in &ule '1( of the
Income %ax &ules. )ith effect from 1.*.1$#+, in the case of overnment servants and employees of
public sector underta,ins, relief under this section could be iven by the employers at the time of
deductin tax at source. %his is provided for under section 1$'('() of the Income %ax (ct. %his has
been extended to all companies, co-operative societies, universities or institutions etc. w.e.f. 1.*.1$#$.
Procedure for granting relief u/s 89(1) by the emloyer:
%he employer should obtain applications from the employee in forms -o. 1./
&elief should be wor,ed out in the manner provided in &ule '1(.
Calculation of relief u/s 89 !hen salary has been recei"ed in
arrears or in ad"ance
As per rule 21A (2)
%he relief on salary received in arrears or in advance (hereinafter to be refereed as additional salary is
computed in the manner laid down in rule '1( (') as under0
1. Calculate the tax payable on the total income, includin the additional salary, of the relevant
previous year in which the same is received.
'. Calculate the tax payable on the total income, excludin the additional salary, of the relevant
previous year in which the additional salary is received.
1. 2ind out the difference between the tax at (1 ) and (').
3. Compute the tax on the total income after includin the additional salary in the previous year to
which such salary relates.
4. Compute the tax on the total income after additional salary in the previous year to which such
salary relates.
*. 2ind out the difference between tax at (3) and (4)
+. %he excess of tax compute at (1) over tax computed at (*) is the amount of relief admissible
under section #$. -o relief is, however, admissible if tax computed at (1) is less then tax
computed at (*). In such a case, the assessee- employee need not apply for relief.
If the additional salary relates to more than one previous year, salary would be spread over the
previous year to which it pertains in the manner explained above.