Definition
Section 89 Relief
Section 89 provides tax relief when you receive salary in arrears or in advance, or certain lump sums, that push you into a higher tax bracket in the year of receipt.
Section 89(1) relief addresses the unfair tax bump that occurs when you receive arrears of salary, advance salary, or certain retirement payments in one year, inflating that year's income and tax.
The relief recalculates tax as if the arrears had been taxed in the years they actually pertained to, and gives you credit for the difference. You claim it by filing Form 10E before your return.
It commonly helps employees who receive back-pay after a revision or settlement, ensuring they are not over-taxed merely because of the timing of receipt.
Related terms
- Leave EncashmentLeave encashment is payment received for accumulated unused leave, typically at retirement or resignation, with specific tax exemptions for certain employees.
- Form 16 (Parts A & B)Form 16 is the TDS certificate your employer issues for salary, with Part A showing tax deducted and deposited, and Part B detailing the salary breakup and deductions.
- Full and Final SettlementFull and final settlement (F&F) is the process of clearing all dues between employer and employee when employment ends, netting off salary, benefits and recoveries.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.