As per the Income Tax Act, Relief u/s 89 is to be claimed by the assessee when they are in receipt of any sum in the nature of salary either in advance or being paid as an arrear in any one financial year of salary for more than 12 months or is in the receipt of payment being profit in lieu of salary [section 17(3)], or assessee has received any sum which is in the nature of family pension as per section 57(iia), due to which the assessee total income is assessed at a rate which is higher than the normal tax slab which it would otherwise be assessed.
This relief is not automatically get reflected in the Income Tax Return, the assessee has to claim such relief in the ITR for the respective assessment year to the Assessing officer, upon receiving the application AO shall grant relief as may be prescribed.
Relief shall not allowed in respect of any amount received or receivable by the assessee in the following cases:
- Voluntary Retirement
- Termination of his service
- In accordance with any scheme or schemes of voluntary retirement
- In the case of a Public sector company as per Section 10(10C)(i), a claim has been filed by the assessee as per section 10(10C)
Note: To avail the benefit of relief u/s 89, filing of Form No. 10E is mandatory. In the case of non-filing of Form No. 10E assessee may be served with a notice from the Income Tax Department and denial of relief.
Claim your relief while filing your Income Tax Return for the relevant assessment year
Claim the amount of relief u/s 89(1) as stated in your Form 16 as shown in the image. Form 16 will contain the exact amount and the calculation thereof in support of relief u/s 89.
Annexure in support of relief under section 89(1) will contain:
- Relief u/s 89(1) on spreading of the arrears of salary paid
2. Relief under section 89(1) on spreading of the arrears of salary paid without perquisite value
3. Relief u/s 89(1) on spreading of the arrears of salary paid with perquisite value
4. Calculation of Income Tax Relief u/s 89 of the Income Tax Act
File Form No. 10E, based on the Annexure of relief u/s 89(1)
Procedure to file Form No. 10E
(i) Login to your Income Tax portal and from the dashboard under “e-File”, the assessee has to select Income Tax Forms
(ii) Under Form Name, the assessee has to select “Form No. 10E”, relevant assessment year, and select to prepare and submit online.
(iii) Submit your Form No. 10E for the relevant assessment year.
If you have claimed the relief u/s 89(1) in your Income Tax Return for the relevant assessment year, and you have received your intimation u/s 143(1) stating that the department has not considered the relief u/s 89(1), instead Income Tax Department has raised the demand for the relevant assessment year.
You can refer to the below image where the assessee has claimed the relief u/s 89 in his/her Income tax return and Income Tax Department has not considered the same and consequently raised demand on the amount relief plus interest thereon.
As per Intimation u/s 143(1), there is tax payable.
It may be possible that instead of raising demand Income Tax Department has reduced your Income Tax Refund for the relevant Assessment Year.
If the Income Tax Department has not considered the relief u/s 89(1), it may be because of the reason that the assessee has not filed Form No. 10E on the Income Tax portal.
For Assessment Year 2020-21, you may have receive the below sms from the Income Tax Department in context with the file ITR
Dear Taxpayer, For CMTxxxxx7D and AY: 2020-21 claim of relief u/s 89 of IT Act was disallowed inadvertently. Error is regretted. Order u/s 154 rectifying the intimation would be issued expeditiously.
If you have received such an error that means there is some clerical error from the Income Tax Department end, it says the error is regretted and the order u/s 154 rectifying such error that happened at the income tax department, they will rectify the same by the intimation that would be issued expeditiously.
The taxpayer, in this case, is not required to do anything if they have already filed Form No. 10E and successfully claim the relief in their ITR for AY 2020-21.
If you have not filed Form No. 10E yet, you will have to file the same, and if Form No. 10E has been filed and still the Income Tax Department has not considered the same, follow these steps to file a rectification request.
- Login to your Income Tax Portal Dashboard
- The taxpayer has to select Income Tax Return, under “View e-Filed Returns/ Forms”
- Select the Acknowledgement Number for the relevant assessment year.
- Select “Submit rectification request” link
- Intimation u/s 143(1) to be rectified, Select Income Tax and the relevant assessment year.
- Under Request type, select “Return data correction (XML)”
- Select a rectification reason “Requesting for cancellation of arrear year demand”