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What is Form 10E?
Income from salary is generally credited at the end of the month. However, there may be circumstances due to which the employer cannot pay on time. In such cases, the employer tends to clear the arrears within a few months.
If your employer clears arrears, you might face higher taxes in the current fiscal year. Income tax is paid on the income you receive in a particular financial year and as per the tax slab you fall in. So does this mean that if you receive additional income, even in the form of arrears, you will be required to pay a high tax amount?
This is where form 10E comes in.
If you are receiving arrears in salary, you can claim relief under section 89. However, to claim this, you must fill out the mandatory form 10E of Income Tax. The 10E form must be filed before you file your income tax return.
Why is Form 10E Important to Tax Relief on Salary Arrears?
Income tax is calculated on the income you earn or receive in a fiscal year. Other than salary, interest income, income from capital gains and any other source of income are taxed if you exceed the exempted limit.
If your income exceeds Rs. 3 lakhs in FY 2023-2024, you'll need to pay a 5% tax on the excess amount (Rs. 50,000) above the exemption limit (Rs. 2.5 lakhs).
If you have received arrears in the form of salary, advance on salary, or pension, which has caused the increase in income, it will be, ideally, computed in your tax calculation.
However, that is not the case here. The arrears that you have received is the delayed income, which was not credited during the stipulated time.
This Is Why Form 10E Is Important. Arrears received in a particular financial year are taxable. However, Section 89 states that the individual can claim relief on arrears provided the form 10E form is filled before the filing of the ITR.
Tax Relief will be given after recalculating the tax for two years: one will be the year when the original amount was supposed to be earned and the year it was received. Based on this, it will be adjusted under the assumption that it was received the year it was originally due.
To claim this benefit, the taxpayer needs to file Form 10E before they fill out the ITR. If the form isn't submitted before filing, the income received won't be considered arrears and will be taxed according to the current year's tax slab.
How to File Form 10E?
If you wish to claim benefits under section 89, you will need to fill out Form 10E. The steps to do so are as follows:
- Visit www.incometaxindiaefiling.gov.in and log in with your credentials
- Go to e-File
- Click on Income Tax Forms and File Income Tax Form.
- Under Form Name, select Form No 10E for relief under section 89.
- Choose the assessment year that you need to file form 10E. If you are claiming relief for salary arrears for Financial Year 2022-2023, Assessment Year will be AY 2023-2024.
- Click on Continue.
- You will be directed to the Instruction Page, where you must click on Let’s Get Started.
- Choose the section and click Continue.
- Fill in the details and Click Preview.
- If everything is correct, click Proceed to e-verify.
- You will be directed to the e-Verify page.
- Once e-Verification is done, you will receive a transaction ID and Acknowledgement Number. Save this number, as you will need it for any future communication. You will also receive an email as well as a confirmation text on your registered mobile number.
Disclaimer:
Our content given in this article is as per the existing provisions, laws and regulations as per the Income Tax Act, 1961 and Income Tax Rules, 1962 issued thereunder. Tax laws are subject to amendments made thereto from time to time. The benefits / guidance mentioned herewith should not be considered as opinion / view of the Company. We request to seek independent view from your personal tax advisor on applicable tax benefits / guidance under the said article.
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