Q1: What is Section 89 of Income Tax? A1: Section 89 of Income Tax provides tax relief to individuals who receive arrears or advances of salary, gratuity, or other lump sum payments. This provision ensures that such lump sum payments, which pertain to earlier years, are taxed as if they were spread over those years, thereby avoiding a higher tax burden in the year of receipt. Q2: Who can benefit from Section 89 of Income Tax? A2: Salaried employees who receive arrears, advance salary, gratuity, or similar lump sum payments can benefit from Section 89. This includes individuals who have received income that should have been paid in previous years but was paid in a lump sum in the current year. Q3: How is the relief under Section 89 calculated? A3: The relief is calculated by comparing the tax liability with and without the arrears for the current year and the years to which the arrears pertain. Specifically: Calculate the tax on total income including arrears for the current year. Calculate the tax on total income excluding arrears for the current year. Compute the difference between these two amounts. Calculate the tax on total income for the past years, both including and excluding the arrears. Find the difference for each past year. The relief is the difference between the current year’s difference and the past years' total difference. Q4: How can I claim relief under Section 89 of Income Tax? A4: To claim relief under Section 89, you must file Form 10E online before submitting your income tax return. This form provides details of the arrears and the years they pertain to. The steps include logging into the Income Tax e-filing portal, navigating to 'e-File' > 'Income Tax Forms' > 'File Income Tax Forms', selecting Form 10E, filling in the required details, and submitting the form.

Understanding Section 89 of Income Tax

Understanding Section 89 of Income Tax: A Comprehensive Guide Wordpress Facebook Twitter Youtube Wordpress What is Section 89 of Income Tax? Section 89 of Income Tax provides relief to individuals who receive a lump sum payment in the form of salary arrears, advance salary, gratuity, or any other sum that pertains to earlier years. This … Continue reading Understanding Section 89 of Income Tax

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