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If your employer pays your past dues in the current financial year, you may incur higher taxes. You might have been in a lower tax bracket the previous financial year. But the salary arrear might propel you to a higher tax slab.
However, you can avoid paying higher taxes on such delayed income by claiming tax relief under Section 89(1) of the Income Tax Act, 1961. But to avail of this benefit, you must file Form 10E online from the income tax authorities e-filing portal. The procedure and necessary steps are described below.
Steps to file Form 10E
1. Go to the website https://incometaxindiaefiling.gov.in/.
2. Log into your e-filing account using your User ID, password and date of birth.
3. Click on the ‘e-File’ tab and select ‘Income Tax Forms.’
4. On the next screen, enter your PAN and select ‘FORM NO 10E’ under the ‘Form Name’ drop-down menu.
5. Choose the correct Assessment Year (AY) for which you need to file Form 10E.
6. Opt for the Submission Mode you prefer.
7. Provide relevant details and select ‘Save Draft.’
8. Since you are filing the form for salary arrears, select Annexure-I and enter applicable information.
9. Verify the form.
10. Click on the ‘Preview and Submit’ button and check your entries before submitting.
How to determine if you qualify for the tax relief?
As per Section 89(1), to apply the tax relief the income taxes for both the year in which the salary was due and the year when you received it are recalculated.
If A is higher than B, you can avail of the 89(1) relief.
Which AY to choose while filing Form 10E?
You have to select the AY during which you have received the salary arrears, even if the arrears are for an earlier year. For example, if you received arrears for the 2019-2020 financial year, you have to select AY 2020-2021.
When to submit Form 10E, before or after filing the income tax return (ITR)?
It is mandatory to submit Form 10E before you file your ITR. Otherwise, the tax authorities will not process your return.
Is it necessary to attach a copy of Form 10E with the ITR?
You have to submit Form 10E online. You need not attach a copy of the form with your ITR because all ITRs are annexure-less. However, you may want to keep a copy with yourself for your tax records. The AO might ask for such documents in the future.
Although it is not compulsory to provide Form 10E to your employer, the organization where you work might ask to see a confirmation of submission.
Who can file Form 10 E?
Any salaried employee working in the following establishments can furnish particulars of arrears received in Form 10E:
Claiming exemptions under Section 89(1) in the ITR without submitting Form 10E first, results in a non-compliance notice from the tax department. Hence, fill out this form carefully and submit on time.