If you have received any portion of your salary in arrears or in advance, or your have received family pension in arrears, you are allowed to claim a tax relief under section 89(1) read along with Rule 21A.

If you’re a Government employee or an employee of a PSU or company or co-operative society or local authority or university or institution or association or body, in such cases you are required to furnish Form No. 10E to your employer to claim relief u/s 89(1).

Normally salary income is received when it becomes due but many times an employee may receive part of his salary in the form of arrear or advance. In such a case relief of tax u/s 89 is allowed under Income Tax Act, 1961.


The Relief u/s 89(1) is available under the following cases:

  • Arrears or advance salary received; For. e.g. those received under the 7th pay commission and are eligible in 2018-19. 
  • Salary received for more than 12 months in the same financial year;
  • Family Pension being paid in arrears;  For. e.g. Again, those received under the various pay commissions. 
  • Gratuity;
  • Compensation on termination of employment; and
  • Commuted Pension


Relief u/s 89(1) can be claimed only if tax paid is actually higher due to arrears received. In case there is no extra tax liability, relief will not be allowed. Where an employee has received VRS Compensation then no relief shall be granted under Section 89 if such employee has claimed exemption u/s 10(10C) for Voluntary Retirement Scheme. An assessee can claim either exemption under section 10(10C) or relief u/s 89 but not both together.


Lets us understand the Calculation of Relief under Section 89(1) with Example:


Let us assume Mr Desai earned Rs 5,20,000 as total income in FY 2017-18 i.e. AY 2018-19 which also includes Rs 1,00,000 as arrears of salary for FY 2012-13. His salary in FY 2012-13 i.e. AY 2013-14 was Rs 3,20,000. In this situation, the relief u/s 89(1) which Mr Keshav can claim will be as per the given calculation.

  • Step 1: Tax on the total income including arrears of salary, i.e. Rs 5,20,000 for the FY 2017-18 = Rs 29,870
  • Step 2: Tax on the total income excluding arrears of salary, i.e. Rs 4,20,000 for the FY 2017-18 = Rs 15,450
  • Step 3: Now subtract the value obtained in step 2 from the value obtained step 1, i.e. Rs 29,870 – Rs 15,450 = Rs 14,420
  • Step 4: Tax on the total income including arrears of salary of FY 2012-13, i.e. Rs 4,20,000 is Rs 22,660.
  • Step 5: Tax on the total income excluding arrears of salary for FY 2012-13, i.e. Rs 3,20,000 is Rs 12,360.
  • Step 6: This step-6 is not required in this example because arrears are related to one year & not multiple years
  • Step 7: Now subtract the value calculated in step 5 from the value calculated in step 4, i.e. Rs 22,660 – Rs 12,360 = Rs 10,300
  • Step 8: Subtract the value calculated in step 6 from the value obtained in step 3, i.e. Rs 14,420 – Rs 10,300 = Rs 4,120