In this post, we will walk through the process of Salary relief u/s 89(1) in Saral Income Tax software.
Income Tax is calculated on the total income received in the year. If the total income includes any past year income which is paid in the current year, you may end up paying a higher tax on such arrears (usually tax rates increase year-on-year).
To save from any additional burden of tax due to delay in receiving income, the tax laws allow a relief under section 89(1). In simple, you need not pay more taxes if there was a delay in payment and you were in a lower tax bracket in that year.
The various types of income arrear that can be considered under relief under section 89(1) are;
- Salary Arrear
- Gratuity
- Compensation
- Pension
Now, we will see the step-by-step process of relief calculation for IT Return filing in Saral Income Tax.
For relief calculation, first, ensure that salary details are entered. After entering the salary details, click on Relief in Tax Meter. The relief details entry screen will be displayed.
Here, identify the type of arrear income from the list on the screen and if relief amount is already calculated, enter the amount against the particular arrear.
If the relief has to be calculated by the software, then click on “…” button for the particular arrear.
In case of salary arrears, on click on “…” button, the display of entry screen will be as below;
Here, enter the number of years from which the past due amount is being received i.e. if the amount received is for 1 year select one and click on GO. The entry columns will be increased for that no. of years.
Select the AY from the drop down from which the amount is being received.
Now, enter the current year salary, other income and saving investment details in the first column of the current AY.
After the current year, enter the income and savings details of the year, in the first column, from which the arrears are received. In the second column, entered the
On entering the details, the tax in case of each entry will be computed and the difference in the tax for the older year and current period will be taken as Relief.
Similarly, enter the arrear amount in all other years, if applicable. After completing the entry process, save the details and return to the main screen.
In case of other types of relief i.e., gratuity, pension & compensation, select the relevant “…” button for auto computation of Relief.
The screen displayed will contain a pre-defined number of previous years for computation i.e., three previous years in case of Pension, Compensation & Gratuity above 15 Years and two previous years in case of Gratuity between 5 & 15 Years.
As in the case of Salary arrears, enter the relevant details in the relevant columns and save.
Note:
The arrear amount will be equally divided into the previous three/two years for computation purpose.
Likewise, the relief will be calculated and total relief will be reduced from the gross tax calculated.
After Return filing, the details of relief which is claimed have to be updated under Form 10E in ITD website.
You can learn about Income from other sources in general:
This completes the process of Relief u/s 89(1) entry in Saral Income Tax.