Receiving salary arrears, advance salary, gratuity, or certain other employment-related payments in a single financial year can push taxable income into a higher tax liability than would have applied if the income had been received in the year to which it actually relates. Form 10E for Section 89(1) relief provides a mechanism to claim relief against this additional tax burden. For employees and payroll teams, understanding when Form 10E applies, how to calculate the relief, and how to complete the filing correctly is essential for accurate tax compliance.
TL;DR
- Form 10E is used to furnish income details when claiming relief under Section 89(1) of the Income Tax Act, 1961.
- It is primarily relevant when salary or certain other eligible employment-related income is received in arrears or advance.
- Form 10E must be submitted online through the income-tax e-filing portal.
- It is advisable to file Form 10E before filing the income tax return.
- If Form 10E is not filed but Section 89 relief is claimed in the ITR, the relief may not be allowed during processing.
- The relief essentially addresses the additional tax burden arising because income relating to different years is taxed in the year of receipt.
- Accurate year-wise salary and tax details are essential for calculating the relief correctly.
What Is Form 10E?
Form 10E is the prescribed form used to furnish particulars of income for claiming relief under Section 89 of the Income Tax Act, 1961. The relief is intended to address situations where salary or other eligible employment-related income received in a particular financial year relates partly to another year and consequently creates an additional tax burden.
For example, suppose an employee receives salary arrears in the current year relating to salary that should have been paid in earlier years. If the entire arrears amount is added to the current year’s income, the employee’s tax liability may be higher than it would have been if the salary had been received in the original years.
Section 89(1) provides relief in such situations by considering the tax impact of the income in the appropriate years. Form 10E captures the information required to determine that relief.
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Why Is Form 10E Important?
Form 10E is not simply an optional supporting document when claiming Section 89 relief. The Income Tax Department states that it is mandatory to file Form 10E for claiming relief on arrears or advance income under salary. If a taxpayer claims the relief in the ITR without filing Form 10E, the ITR may be processed but the claimed relief will not be allowed.
This makes Form 10E an important part of the tax-filing process for employees who receive eligible arrears or advance payments.
Who Is Eligible to Claim Relief Under Section 89(1)?
Section 89 relief can apply when an individual receives certain employment-related income in arrears or advance and the timing of the receipt creates an additional tax burden.
The Income Tax Department’s Form 10E guidance identifies the following broad categories covered by the form:
- Salary or family pension received in arrears
- Salary or family pension received in advance
- Certain gratuity payments relating to past services
- Certain compensation connected with termination of employment
- Commutation of pension
However, merely receiving an arrear payment does not mean that a taxpayer will necessarily receive a particular amount of relief. The relief depends on the tax impact of including the income in the year of receipt compared with the tax that would have applied had the income been taxed in the relevant year or years.
Salary Arrears
Salary arrears are one of the most common situations in which Form 10E becomes relevant.
Arrears can arise because of a salary revision, promotion, court or tribunal order, delayed settlement, retrospective increment, or another adjustment that relates to an earlier period.
The important point is that the arrears should be allocated to the relevant previous years when calculating the Section 89 relief rather than simply treating the entire amount as belonging to the year in which it was received.
Advance Salary
Form 10E can also apply where salary is received in advance. The Income Tax Department provides a separate section within the form for salary or family pension received in advance.
The calculation considers the tax effect of receiving the amount earlier than the period to which it relates.
Pro Tip: Before starting Form 10E, prepare a year-wise statement showing the arrears or advance amount, the original year to which it relates, and the corresponding tax impact.
Form 10E Calculation: How Is Relief Calculated?
The basic principle behind Section 89(1) relief is to compare the tax impact under two situations:
- Tax payable when the additional income is taxed in the year it is actually received.
- Tax that would have been payable if the income had been taxed in the year to which it actually relates.
The difference between these amounts represents the broad basis of the relief, subject to the applicable provisions and detailed calculation.
Simple Example of Salary Arrears
Consider an employee who receives ₹2,00,000 of salary arrears in FY 2025–26. The arrears relate to FY 2023–24 and FY 2024–25.
Without Section 89 relief, the entire ₹2,00,000 may increase the employee’s taxable income for FY 2025–26.
For relief calculation, the employee instead considers:
Step 1: Calculate tax on the current year’s income including the arrears.
Step 2: Calculate tax on the current year’s income excluding the arrears.
Step 3: Calculate the additional tax attributable to the arrears in the year of receipt.
Step 4: Allocate the arrears to the relevant earlier years.
Step 5: Recalculate the tax for each relevant year after adding the corresponding arrears.
Step 6: Determine the additional tax that would have arisen in those years.
Step 7: Compare the two tax impacts.
The resulting difference forms the basis of the Section 89 relief.
The exact computation should be performed using the applicable tax regime, deductions, exemptions, and tax rules relevant to each assessment year.
Step-by-Step Form 10E Filing Process
Form 10E is filed online through the income-tax e-filing portal. The Income Tax Department provides the following broad process.
Step 1: Log In to the E-Filing Portal
Log in using your registered credentials.
A taxpayer needs to be a registered user, and the PAN status should be active to use the service.
Step 2: Go to Income Tax Forms
Navigate to:
e-File → Income Tax Forms → File Income Tax Forms
Then search for Form 10E under the applicable Income Tax Act, 1961 forms.
Step 3: Select the Assessment Year
Select the relevant assessment year for which the relief is being claimed and continue with the filing process.
Step 4: Start Form 10E
Select “Let’s Get Started” and choose the applicable income category.
The form contains different sections depending on the type of income for which relief is being claimed.
Step 5: Verify Personal Information
Review the personal information displayed in the form and ensure the required profile details are complete.
The Income Tax Department specifically notes that mandatory information in the taxpayer’s profile, including residential status, should be completed.
Step 6: Enter Arrear or Advance Salary Details
For salary arrears, enter the relevant details and provide the year-wise information required by the form.
The arrear salary section draws its information from the year-wise details entered in the applicable table.
For advance salary, provide the corresponding information in the advance salary section.
Step 7: Complete the Applicable Annexure
Form 10E contains multiple sections/annexures corresponding to different categories of eligible income.
The Income Tax Department identifies sections covering arrear or advance salary/family pension, certain gratuity payments, qualifying termination compensation, and commutation of pension.
Only the applicable section should be completed based on the nature of the payment.
Step 8: Preview and Submit
Review all information carefully before submission.
Check that the financial years, amounts, salary details, and tax calculations correspond with the relevant documents and records.
When Should You File Form 10E?
The Income Tax Department advises taxpayers to file Form 10E before filing the income tax return.
This sequence is important because Section 89 relief is subsequently claimed in the ITR. Filing Form 10E first establishes the required particulars for the relief claim.
For example:
Receive salary arrears → Calculate Section 89 relief → File Form 10E → File ITR and claim relief
Waiting until after filing the ITR can create unnecessary complications if the relief is not recognized during processing.
Documents and Information Required for Form 10E
Although Form 10E itself is submitted online, employees should keep the underlying information ready before starting the calculation.
Salary Arrear Statement
The employee should obtain a clear statement showing the amount of arrears and the period to which the payment relates.
This is particularly important where arrears cover multiple financial years.
Salary and Tax Details
The calculation requires accurate salary and tax information for the relevant years. Employees should therefore retain salary slips, Form 16, tax computation details, and other relevant payroll records.
Year-Wise Allocation
If arrears relate to multiple years, the amount should be appropriately allocated to each relevant year.
A single total figure without year-wise allocation may not be sufficient for accurately completing the applicable details.
Employer Documentation
Where available, an employer-issued arrear statement or salary revision statement can make the calculation easier and provide a useful record for future reference.
Form 10E and Form 16: What’s the Difference?
Form 10E and Form 16 serve different purposes.
| Form | Primary purpose |
| Form 10E | Furnishes particulars for claiming Section 89 relief |
| Form 16 | Provides salary and TDS details furnished by the employer |
| ITR | Used by the taxpayer to report income and claim eligible relief |
Form 16 can provide important information needed for the Section 89 calculation, but it does not replace Form 10E.
Similarly, filing Form 10E does not itself mean the relief has been claimed in the ITR. The taxpayer must also report the applicable relief while filing the return.
Common Mistakes While Filing Form 10E
Filing Form 10E After the ITR
The recommended sequence is to submit Form 10E before filing the ITR.
The Income Tax Department specifically advises taxpayers to do so, and failure to file Form 10E can result in Section 89 relief being disallowed during ITR processing.
Entering the Entire Arrears Amount Against One Year
If arrears relate to multiple previous years, the amount should be allocated according to the period to which it relates.
Incorrect year-wise allocation can produce an inaccurate relief calculation.
Using Incorrect Tax Information
The Section 89 calculation depends on the tax impact for different years. Using incorrect salary, deductions, exemptions, or tax information can therefore affect the resulting relief.
Confusing Relief With a Refund
Section 89 relief reduces the additional tax liability attributable to the timing of the income. It should not automatically be understood as a separate cash benefit or refund.
The actual refund or tax payable will depend on the taxpayer’s complete ITR and tax payments.
Ignoring the Applicable Tax Regime
Tax calculations can differ depending on the applicable tax regime and assessment year.
The Income Tax Department’s current Form 10E guidance notes that the system-calculated tax for AY 2024–25 onward uses the default new tax regime, while earlier assessment years up to AY 2023–24 use the old tax regime for the system calculation.
How HR Teams Can Simplify Arrears and Payroll Management
Section 89 calculations often begin with accurate payroll records. HR and payroll teams need reliable information on salary revisions, arrears, deductions, employee records, and payment periods.
Qandle provides centralized employee data and payroll capabilities, including salary structures, pay heads, allowances, deductions, reimbursements, payslips, and payroll reporting. Its employee database also stores employment information and documents in one place.
For organizations processing retrospective salary revisions or arrears across multiple employees, maintaining organized payroll records can make it easier to provide employees with accurate salary information needed for their personal tax calculations. Qandle’s reporting capabilities can also provide payroll and compensation-related visibility for HR and finance teams.
The objective is straightforward: maintain accurate salary data by period so that employees and payroll teams have a reliable foundation when handling tax-related adjustments.
Conclusion
Form 10E for Section 89(1) relief is an important compliance requirement when eligible salary or other qualifying employment-related payments are received in arrears or advance. The purpose is to address the additional tax burden that can arise when income relating to multiple periods is taxed in the year of receipt.
The process involves identifying the relevant income, allocating it to the appropriate years, calculating the corresponding tax impact, filing Form 10E online, and then claiming the resulting relief in the ITR. Most importantly, Form 10E should be filed before the ITR, as failure to submit it can result in the Section 89 relief being disallowed during processing.
For HR teams, accurate payroll records are the foundation of smooth salary-arrear administration. Qandle helps centralize employee information, payroll, salary structures, documents, and reports, making payroll administration more organized.
If you’re looking to simplify payroll operations and improve employee self-service, book a personalized demo with Qandle today.
FAQ’s
1. What is Form 10E?
Form 10E is used to furnish particulars of income when claiming relief under Section 89 of the Income Tax Act, 1961, particularly in cases involving salary received in arrears or advance.
2. Is Form 10E mandatory for claiming Section 89 relief?
Yes. The Income Tax Department states that Form 10E is mandatory for claiming tax relief on eligible arrear or advance income under salary. If it is not filed, the Section 89 relief claimed in the ITR may not be allowed during processing.
3. Can Form 10E be filed online?
Yes. Form 10E is submitted online through the income-tax e-filing portal. There is no need to download and submit a physical copy.
4. Should Form 10E be filed before the ITR?
Yes. The Income Tax Department advises filing Form 10E before filing the income tax return.
5. How is Section 89 relief calculated?
Broadly, the calculation compares the additional tax resulting from receiving the eligible income in the current year with the additional tax that would have arisen if the income had been taxed in the year or years to which it relates.
6. What information is needed to calculate Form 10E relief?
You generally need accurate details of the arrears or advance payment, the relevant financial years, salary information, and applicable tax details for the affected years. Year-wise allocation is particularly important for arrears relating to multiple years.
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