Introduction

Employees frequently receive salary arrears, bonuses, or past dues relating to previous financial years. When these amounts are paid in a lump sum, they may push the employee into a higher tax slab for the current year — resulting in unnecessarily higher tax liability.

To avoid this, the Income Tax Act provides relief under Section 89(1), which allows tax to be recalculated in a fair manner as if the income had been taxed in the correct year.

To claim this relief, employees must file Form 10E before filing their Income Tax Return (ITR).

This guide by Bisways Consulting Group explains what Form 10E is, how relief is calculated, when it is mandatory, and the step-by-step filing process.

What Is Form 10E?

Form 10E is an online form filed on the Income Tax Portal to claim relief under Section 89(1) for:

• Salary arrears

• Advance salary

• Gratuity for past years

• Pension arrears

Without filing Form 10E, the tax department may reject the relief claim, even if eligible.

Why Is Section 89(1) Relief Important?

Section 89(1) ensures fair taxation by:

• Avoiding higher tax due to bunching of income

• Calculating tax as per the slab of the year to which arrears relate

• Preventing double taxation on delayed payments

• Reducing overall tax liability for salaried employees

Who Should File Form 10E?

File Form 10E if you receive:

• Salary arrears for previous years

• Revised pay (7th Pay Commission adjustments)

• Backdated increments

• Gratuity for past services

• Commuted pension or arrears

• Leave encashment relating to earlier years

Mandatory: If you are claiming relief in ITR, Form 10E must be filed first.

How Relief Under Section 89(1) Is Calculated

The tax department compares:

• Tax payable on total income including arrears (in the year of receipt)

• Tax that would have been payable

• Had arrears been taxed in their respective years

Relief = Difference between the two tax amounts, if it reduces tax liability.

The Income Tax Portal auto-calculates this once the details are entered.

Step-by-Step Process to File Form 10E

Step 1: Log in to Income Tax Portal

Go to: e-File → Income Tax Forms → File Income Tax Forms → Form 10E.

Step 2: Select the Relevant Assessment Year

Choose the year for which you are filing the return.

Step 3: Enter Arrear Details

Fill the required schedules:

• Annexure I (Salary arrears)

• 80G

• Annexure II/IIA (Gratuity)

• Annexure III (Pension)

• Annexure IV (Compensation on termination)

Step 4: Verify and Submit

Submit using EVC or DSC.

Step 5: File ITR Afterward

Mention the relief amount in:

• Schedule TTI → Section 89(1) Relief

• Without Form 10E, the portal will flag the claim.

Documents to Keep Ready

Although attachments are not uploaded, keep these for reference:

• Employer-provided arrears computation

• Salary slips for relevant years

• Form 16

• Gratuity or pension order (if applicable)

• Revised pay notification

Common Mistakes to Avoid

• Filing ITR without filing Form 10E

• Entering wrong assessment years

• Not matching data with employer’s computation

• Claiming relief for ineligible amounts

• Filing incorrect annexure schedules

These mistakes may lead to processing delays, rectification requests, or denial of relief.

Who Benefits the Most From Filing Form 10E?

• Government employees receiving pay revisions

• Employees receiving backdated increments

• Individuals with delayed bonus payouts

• Retired employees receiving pension or gratuity arrears

Conclusion

Form 10E is essential for employees who receive salary arrears or past dues and wish to claim rightful relief under Section 89(1). Filing it before the ITR ensures smooth processing and prevents unnecessary tax burdens.
Bisways Consulting Group provides expert support in Section 89(1) calculations, Form 10E filing, ITR preparation, and complete income tax compliance for salaried individuals and professionals.