Income Tax Relief for 6CPC Arrears under Section 89(1)

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Friday, November 14, 2008
This article is posted in Income Tax category and has 39 Comments so far.

For the Receipt of pay and allowances pertain to previous years as arrears,  Income tax Act provides for a relief under Section 89(1) of the IT Act.

It works as follows.

Spread the arrears that you have received to the respective years.  For example, if you have received arrears for the last two financial years and the current year break it into three (i.e) for the year 2006-07, 2007-08,  and 2008-09.

Calculation 1

Calculate income tax for the taxable income without including arrears for 2006-07 and 2007-08 seperately based on tax structure applicable during these years.  Then add apportioned arrears to the respective year’s taxable income and again find the tax.  Find the difference in tax on account of addition of arrears portion.   this difference has to be calculated for 2006-07 and 2007-08 seperately.  Then these two difference tax amounts have to be added to find out the total difference in tax on account of arrears portion added to the taxable income in the relevant years.  This is the resultant amount calculated in “Calculation 1″

Calculation 2

Then  find out the  income tax for the current year without including the arrears.  Then find out the income tax for current year after including the total arrears received which relates to current year and also the previous years.  Difference of these two tax amounts  is the additional tax we have to pay  on account of receipt the arrears for the current year and the previous years.  This is the resultant amount calculated in “Calculation 2″

Now, subtract the resultant amount as per “Calculation 1″ from the resultant amount as per “Calculation 2″.  This gives your income tax relief under Section 89 (1).  Obviously, if resultant amount as per “Calculation 1″  is not less, relief is Nil.

This calculation gains significance as all of us have received the 6CPC arrears during this year which may add to our tax liability.

Since this calculation is little bit complex if not difficult, GConnect has come up with an application to calculate Income tax relief under Section 89(1).

Check this Calculator for Income Tax relief under Section  89(1)

Also, GConnect has a full-fledged Income Tax Calculation application for finding your tax liability  for the year 2008-09 (Assessment year 2009-10)

Check this Income Tax Calculation for the year 2008-09

Also check Income tax calculation on house property and Income tax calculation for HRA


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39 Responses to “Income Tax Relief for 6CPC Arrears under Section 89(1)”

  1. vasumathy jayaraman said on Friday, November 14, 2008, 21:15

    Hello,
    i wish to ask how many previous years r allowed for calclulating 89/1 tax relief. is there any restrictions? for accounting year 05-06 we have received two months arrears. will that can be shown under 89/1 under 05-06 accounting year? Govt has not clearly stated 40% of arrears has to be apportioned yearwise. will it not be appropriate if it is to be apportioned yearwise taking into account of full arrears of that related year till the arrears get wiped out. for example : total arrears paid is 50000 (40%). 05-06 full arrears is 10,000, 06-07 arrears is 30000 and 07-08 is the balance of 10000. seeking ur advice.

    Reply

  2. u k acharya said on Saturday, November 15, 2008, 14:02

    The reckoner will be of immense help to all the tax payers as almost every body will be under the noose of Taxman

    Reply

  3. nageswara rao said on Sunday, November 23, 2008, 16:37

    Iam a primary teacher with basic Rs. 6205(on Jan,2006)incrimentRs.175. My scale is 5500-175-9000.6pc given step up for teachers. What is my basic on Jan,2006.? please inform me.

    Reply

  4. vikas said on Friday, December 12, 2008, 10:53

    For calculation of relief under section 89(1), What amount of arrears to be taken into account, total amount of arrears or arrears recevied during the year? Please suggest

    Reply

  5. Kamesh said on Thursday, December 18, 2008, 11:39

    This is useful calculator indeed. However, I have 2 queries. Firstly, whether the tax to be calculated for previous assessment years is with or without surcharge. Secondly, supposing section 89(1) benefit is nil (zero) even then whether I am allowed to show income under previous years and gain benefit over all as the current year’s income becomes less if I show income in previous years. This gains significance for someone whose taxable income this year is above 10 lakhs because of arrears. If the income is allowed to show under previous years – the surcharge component becomes less even if 89(1) benefit is nil. Can someone please clarify.
    Thanks!

    Reply

  6. Invoiweerimmess said on Saturday, December 27, 2008, 2:20

    rivssrbkrcdckkyowell, hi admin adn people nice forum indeed. how’s life? hope it’s introduce branch ;)

    Reply

  7. nsdev said on Tuesday, December 30, 2008, 11:19

    the calculator does not take into account the cess on incometax. though for people who had paid tax in the previous years, no difference is made out due to cess, for people who were not paying tax, the difference would be 2% and 3 % as per fin year. pls rectify the same

    Reply

  8. Nawang Dorje said on Tuesday, December 30, 2008, 13:51

    Hello,
    i wish to ask how many previous years r allowed for calclulating 89/1 tax relief. is there any restrictions? for accounting year 05-06 we have received two months arrears. will that can be shown under 89/1 under 05-06 accounting year? Govt has not clearly stated 40% of arrears has to be apportioned yearwise. will it not be appropriate if it is to be apportioned yearwise taking into account of full arrears of that related year till the arrears get wiped out. for example : total arrears paid is 63516 (40%). 05-06 full arrears is 9208, 06-07 arrears is 54308 . seeking ur advice.

    Reply

  9. S.H.Khan said on Friday, January 2, 2009, 11:47

    This is useful calculator indeed. However, I have 2 queries. Firstly, whether the tax to be calculated for previous assessment years is with or without cess and surcharge. The calculator does not include cess and surcharge in the tax for previous years. Can any body clarify? Secondly, supposing section 89(1) benefit is nil (zero) even then whether I am allowed to show income under previous years and gain benefit over all as the current year’s income becomes less if I show income in previous years. This gains significance for someone whose taxable income this year is above 10 lakhs because of arrears of the previous years. If the income is allowed to show under previous years – the surcharge component becomes less or ‘nil’ even if 89(1) benefit is nil. Can someone please clarify.
    Thanks!

    Reply

  10. raman, GConnect admin team said on Monday, January 5, 2009, 9:36

    As per the IT provisions, while calculating the income tax for the previous years (for the purpose of relief under Section 89(1)), the elements such as education cess, surcharge etc., were not calculated. However, as rightly suggested by users, the education cess and surcharge calculations for the current year have now been made on the income tax amount after deducting the relief amount under Section 89(1). We seek further suggestions of the users, so that we could make this income tax calculator a perfect one.

    Reply

  11. Narendra Kishor Panda said on Saturday, February 7, 2009, 20:15

    How to calculate the income tax payable for a retired person? Are the full amounts of gratuity, e.l. encashment and commuted pension taxable?

    Reply

  12. kam said on Saturday, February 14, 2009, 18:28

    For someone not getting benefit u/s 89(1) in AY 2009-10 even after showing 40% arrears under different previous years, can these 40% arrears be shown in AY 2010-11 along with 60% receivable in FY 2009-10? i.e. 100% of arrears spread across FY 2005-06, 07-08, 08-09, and 09-10.

    Reply

  13. Hariharasubramanian said on Tuesday, June 9, 2009, 17:49

    Sir, I have got my arrears (40%) only in May 2009 only. Is it possible for me to get relief under 89(1) and show it (40%) in the previous year i.e. 2008-09. Any suggestion in this regard would be highly appreciated. Thanks.!!!!!!!!!!!!!

    Reply

  14. Vinay Kumar said on Tuesday, June 9, 2009, 20:38

    Doesone submit form 10E along with ITR-1/2 for the assessment year 2009-10, Or Form 10E alone is sufficient?

    Reply

  15. rajaram said on Friday, July 24, 2009, 10:16

    its really superb

    Reply

  16. biswa said on Thursday, November 26, 2009, 21:00

    in the calculator, no mention of savings part which is Rs100000/- or less depending on individual. this will make difference in actual tax paid. please clarify this point.

    Reply

    admin Reply:
    November 26th, 2009 at 9:52 pm

    @Biswa
    Did you verify GConnect oneline Income Tax software ? It contains provisions to calculate your savings too Please check
    http://gconnect.in/pages/it2009/register-form.php

    Reply

  17. SVSANKAR said on Sunday, November 29, 2009, 21:08

    Dear GConnect team,
    When 40% arrears relief has been availed then the taxable income for the relevant year in the table A should be the sum of taxable income as per form 16 plus the 40% of arrears for the relevant year for which relief has been claimed and taxable income income for the 2008-09 should be without the portion of the arrears split up for relief. The calculator is OK if relief is not claimed. Tax of course should be with cess and surcharge. Please do the needful. An excellent attempt and a helpful calculator.

    Reply

    admin Reply:
    November 30th, 2009 at 10:33 pm

    @SVSankar
    Thanks for your comments. the idea behind the non-distribution of 40% arrears to the relevant years is the taxes worked out for 2008-09 is the tax after excluding the relief under section 89 for the year 2008-09. It is because this is the actual tax paid by the person who had availed section 89 in 2008-09. we are of the opinion that since we had excluded the relief from the tax payable for the year 2008-09(if one availed relief during 2008-09), we need not distribute the 40% arrears to the previous years.

    Reply

    admin Reply:
    December 2nd, 2009 at 8:42 am

    @SVSankar
    Thanks for your comments. If relief under section 89 is availed in the year 2008-09, the actual tax paid should have been the tax less the relief. This tax less relief for the year 2008-09 has been worked out based on the distribution of 40% arrears to the previous years. we are of the opinion that once the tax less relief for the year 2008-09 is taken as tax for the year 2008-09 we need not distribute 40% arrears to the previous years for the purpose of calculating relief for this year 2009-10. You can see in the year 2008-09 entire 40% arrears is shown as an income, since we received the same in that year

    Reply

  18. dilip said on Thursday, December 3, 2009, 16:32

    6cpc arreres in maharastra in 5 instalment first instalment is deposited in gpf account in year 209-10 .how to calculate income tax for year 2009-10 6cpc arreares by using 10 e

    Reply

  19. SVSANKAR said on Friday, December 4, 2009, 18:53

    Dear Gconnect team,

    I am of the opinion that the method applied by gconnect team will be correct if the the arrears has been received in one instalment. But now it is in two instalments. The income for the year relevant years should be as per table A of 2008-09 relief calculated and for 2008-09 it should be reduced to the extent of arrears split up and 60% should be added. I would request gconnect team to discuss it with IT authorities please. This is just intended to make gconnects relief calculator the most correct one and also refresh my knowledge on the subject. I would request gconnect team to appraise me as to where I could find the orders that tax in table A is without cess or surcharge, because if cess is added the relief will be more.

    Reply

  20. SVSANKAR said on Friday, December 4, 2009, 19:11

    sorry please ignore last three sentences rgarding cess and surcharge.

    Reply

  21. M R Narayanan said on Wednesday, December 9, 2009, 23:22

    Your method /calculations do not cater to the needs of Senior Citizens. Will be helpful if you can modify and include the Senior Citizen category too.

    Reply

  22. Vijayakumar said on Monday, December 14, 2009, 15:11

    sir,
    kindly provide IT relief calculator under Sec 89[1]for arrears of direct recruits joined after 01.01.2006 being granted GP 4600

    Reply

    admin Reply:
    December 28th, 2009 at 6:13 pm

    @Vijayaykumar
    You can also use this tool. Keep the fields relating to 2005-06 as zero, since you did not join in the Government service that time

    Reply

  23. Ashok Chander Kumar said on Wednesday, December 23, 2009, 13:12

    Sir,
    The ‘Tool for Calculation of rebate under Section 89(1) does not give calculation for senior citizens. Rquest include. please confirm

    Reply

  24. JHRao said on Wednesday, December 23, 2009, 18:29

    I have received arrears from 1st march 2001 to 31st August 2009 now.How to apply

    the relief under 89(1).Please explain the method to calculate incometax payable.

    Reply

  25. nasirkhan said on Wednesday, January 6, 2010, 14:48

    Why children education allowance is examped under the section 10 @ Rs. 100 per month with maximum Rs. 2400 for two children when govt. is giving @ 1000 per month for one child for the maximum Rs. 24000 for two children

    Reply

  26. nasirkhan said on Wednesday, January 6, 2010, 15:00

    how maximum rebat can be taken with all available sources so that the tax can be minimize the incom tax to salried person individualy give tips for easy finding

    Reply

  27. sanjay kumar said on Friday, January 8, 2010, 12:21

    i think nasirkhan has raised right question. entire amount of CEA i.e. Rs. 12,000 per child should be exempted in the tax limit.

    Reply

  28. anay joshi said on Friday, January 29, 2010, 17:40

    6cpc arreres in maharastra in 5 instalment first instalment is deposited in gpf account in year 209-10 .how to calculate income tax for year 2009-10 6cpc arreares by using 10 e

    Reply

  29. anay joshi said on Friday, January 29, 2010, 17:44

    6cpc arreres in maharastra in 5 instalment first instalment is deposited in gpf account in year 2009-10 .how to calculate income tax for year 2009-10 6cpc arreares by using 10 e.total arreres amt diveded in 5 installment and it is deposited in gpf a/c so how to calculate 89 relif

    Reply

    admin Reply:
    January 30th, 2010 at 12:13 pm

    @Anay Joshi
    You can claim relief under section 89(1) for the arrears received in the year 2009-10, though the same is deposited as GPF

    Reply

  30. RATTAN said on Tuesday, February 2, 2010, 17:22

    If u cater for senior citizens it will be useful to us also. Thanks.

    Reply

    admin Reply:
    February 4th, 2010 at 7:17 am

    @Rattan
    we will do the needful soon sir

    Reply

    RATTAN Reply:
    March 8th, 2010 at 10:35 pm

    Thanks for taking care of seniors for relief u/s 89(1)

    Reply

  31. MK Yadav said on Tuesday, February 16, 2010, 6:16

    Sir
    I have not shown/claimed rebate u/s 24(B)( i.e. home loan interest) in FY’s 05-06,06-07 and 07-08 so that these are not appeared on form 16 or returns of the respective years. Now whether I can show these rebates to get advantages of relief u/s 89 in view of my arrears of 6CPC?If yes , then how?

    Reply

    admin Reply:
    February 17th, 2010 at 1:56 pm

    It may not be possible to utilise the unclaimed housing loan interest pertaining to the previous years now.

    Reply

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