How to Claim Section 89 Relief While Filing Income Tax Online
Many salaried taxpayers receive arrears at some point in their careers. These may include salary revisions paid late, delayed bonus payouts, pension arrears, or other past-due payments received in a later year. While arrears increase your income, they can also push you into a higher tax bracket for that year, increasing your tax liability unfairly.
This is where Section 89 of Income Tax Act becomes useful. It allows taxpayers to claim relief when arrears are received in a different year than the year to which they actually relate. The purpose is to reduce the extra tax burden created by the timing mismatch.
This article explains how to claim Section 89 relief while filing income tax online, and why it matters. It also briefly connects the topic to the broader economy through the tax to GDP ratio, since arrears, income reporting, and compliance contribute to how effectively taxes are collected.
What is Section 89 relief?
Section 89 relief under Section 89 of Income Tax Act is a tax relief mechanism for individuals who receive certain types of income in arrears or advance. It applies when income relating to earlier years is received in the current year, resulting in higher tax due to increased total income.
The relief works by recalculating tax liability:
- once including arrears in the year of receipt
- and once by spreading the arrears across the years to which they belong
The difference is treated as the relief amount.
Who can claim relief under Section 89 of Income Tax Act?
Section 89 relief is typically claimed by:
- salaried employees receiving salary arrears
- individuals receiving pension arrears
- employees receiving advance salary
- taxpayers receiving family pension arrears in some cases
The relief is available only if the arrears relate to earlier financial years and have been received in a later year.
Why Section 89 relief is important
Without Section 89 relief, arrears are taxed fully in the year of receipt. This can lead to:
- higher total tax due to slab changes
- reduced take-home benefit from arrears
- incorrect tax burden compared to the year in which the income actually belongs
Section 89 ensures that taxpayers do not pay extra tax simply because their employer delayed payment.
What you need before filing Section 89 relief online
To claim Section 89 relief correctly, you should have:
- arrears breakup year-wise
- Form 16 or salary certificate showing arrears
- previous years’ income details (if required for calculation)
- access to the income tax portal
Most employers provide an arrears statement, which helps in preparing the calculation.
Step-by-step: how to claim Section 89 relief online
Step 1: Calculate the relief amount
Before filing the return, calculate relief under Section 89. This is done using Form 10E. The relief is not allowed unless Form 10E is submitted.
Step 2: Submit Form 10E on the income tax portal
Log in to the income tax e-filing portal and go to the section for filing Form 10E. You will need to select the relevant annexure depending on the type of arrears, such as salary arrears.
Enter the arrears details year-wise and complete the form carefully.
Step 3: Confirm submission and acknowledgement
After filing Form 10E, download the acknowledgement for your records. This is essential because the portal may reject the relief claim if Form 10E is missing.
Step 4: File the income tax return
While filing the income tax return for the current year, include the arrears in salary income as reflected in Form 16. Then, under the relief section, enter the relief amount calculated under Section 89.
Step 5: Verify and submit the return
Once filed, verify the return through the available methods such as Aadhaar OTP, net banking, or digital signature. Without verification, the return is not processed.
Common mistakes taxpayers make
Even when Section 89 relief is available, many taxpayers fail to claim it due to avoidable mistakes such as:
- not filing Form 10E before filing the return
- entering arrears without proper year-wise breakup
- claiming relief without including arrears in salary income
- mismatch between Form 10E and ITR details
- assuming employer has already applied the relief automatically
The portal usually disallows relief if Form 10E is not submitted.
Does the new tax regime affect Section 89 relief?
Section 89 relief applies to arrears, and the relief calculation depends on tax rates applicable in the relevant years. The exact benefit may differ based on whether you are under the old or new tax regime for the year of receipt.
Since this topic is directly linked to income tax computation, mentioning current tax slab rates can be relevant. However, slab rates may change year to year, and Section 89 calculations require the correct slab rates for each year involved.
Therefore, rather than listing slabs in detail here, the key point is that the relief depends on the tax structure applicable in the relevant years.
How this links to the tax to GDP ratio
The tax to GDP ratio reflects how effectively a country collects taxes compared to its overall economic output. When salaried taxpayers correctly report income, file returns, and claim relief through the proper mechanism, it strengthens tax compliance.
Better compliance supports a stable tax system and improves the tax to GDP ratio over time. While individual claims under Section 89 are small in the national context, widespread compliance and accurate reporting contribute to a stronger tax base.
Conclusion
Section 89 relief is a valuable provision for salaried taxpayers who receive arrears in a later year. By allowing tax recalculation across the years to which the income actually belongs, Section 89 of Income Tax Act prevents unfair tax burden caused by delayed payments.
To claim the relief successfully, taxpayers must file Form 10E online before filing the income tax return and ensure that arrears details match Form 16. While the relief calculation depends on applicable tax rates in the relevant years, the online filing process is straightforward when the required information is available.
Accurate filing and compliance also contribute to broader fiscal stability, which is reflected in indicators such as the tax to GDP ratio.
