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Income
under the head of Salaries :
Relief
on arrears of salary
An
employee, when he receives salary in arrears, can avail relief on
arrears of salary u/s 89(1) of the Income Tax Act. The relief is
provided to mitigate the hardships on account of differential rate
of income tax for different years. The procedure for computing the
relief is given under Rule 21A of the Income Tax Rules. The following
procedure shows how to calculate the relief on arrears of salary
or salary received in advance. No relief
- Tax
payable on the total income should be calculated including the
arrears of salary.
- Tax
payable on the total income should be calculated excluding the
arrears of salary.
- The
difference between the tax payable (i.e. the difference of 1 and
2 above) should be worked out.
- Calculate
the tax on the total income including the arrears of salary. (Tax
to be calculated after claiming all deductions/rebates).
- Calculate
the tax on the total income excluding the arrears of salary. (Tax
to be calculated after claiming all deductions/rebates).
- The
difference between the tax (i.e. the difference of 4 and 5) should
be worked out.
- Difference
between the tax payable (at 3 above) and tax (at 6 above) shall
be the amount of relief admissible u/s 89(1) of the Income Tax
Act.
- Relief
is, however, not admissible if the tax payable (as per col.3 above)
is less than the tax (as per col.6 above). In such a case the
employee cannot apply for relief.
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