Section 89(1) Relief & Form 10E: Cut Tax on Salary Arrears
Last verified: June 2026, against the Income Tax Act provisions cited below. Figures apply to FY 2025-26 (AY 2026-27). This is general information, not personal tax advice.
Got a lump sum of salary arrears — a delayed pay revision, back-dated promotion, or arrears of pension — and watched it shove you into a higher tax slab? Section 89(1) exists precisely to soften that blow, by giving you relief as if the money had been taxed in the years it actually related to. But you must file Form 10E first, or the relief is denied.
Why arrears need relief
Income tax is charged in the year you receive the money. So arrears for three past years, paid all at once, are taxed together — often at a higher slab than if they had been spread across those years. Section 89(1) restores fairness by recalculating the tax as if each part were taxed in its proper year.
How the relief is computed
- Calculate tax on your total income of the current year including the arrears.
- Calculate tax on the current year excluding the arrears.
- The difference is the extra tax caused by bunching (Amount A).
- Now spread the arrears back to the years they relate to, and compute the extra tax those years would have borne (Amount B).
- Relief under 89(1) = Amount A − Amount B. If bunching cost you more than spreading would have, you get the difference back.
Form 10E is mandatory — and must come first
You must file Form 10E online on the e-filing portal before you file your ITR. If you claim 89(1) relief in your return without having filed Form 10E, the department disallows the relief and issues an intimation removing it. Filing 10E is free and takes a few minutes.
How to file Form 10E
- Log in to the e-filing portal → e-File → Income Tax Forms → File Income Tax Forms → Form 10E.
- Select the relevant assessment year and fill the annexure for salary arrears (Annexure I).
- Enter the arrears amount and the years they relate to; the form helps compute the relief.
- Submit and e-verify, then claim the relief figure in your ITR.
What it covers
Beyond salary arrears, Section 89(1) can apply to advance salary, arrears of family pension, gratuity in certain cases, commuted pension and compensation on termination. Keep the employer’s arrears breakup handy.
FAQs
Can I claim 89(1) relief without Form 10E?
No. Form 10E must be filed online before your ITR, or the relief will be disallowed.
Does the relief mean the arrears are tax-free?
No. The arrears are still taxed; you only avoid the extra tax caused by everything bunching into one year.
Where do I show the relief in my ITR?
In the tax computation, there is a dedicated field for “Relief under Section 89” — enter the amount computed in Form 10E.
Is Form 10E needed every year?
Only for years in which you receive arrears or advance salary and wish to claim relief.
