Author Topic: Income Tax Relief -Arrears of 6 th pay commission --- Relief Under section89(1)  (Read 8216 times)

SkS

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Dear All
You must have submitted your form no2. But check it once again.
For the Receipt of pay and allowances pertain to previous years as arrears,  Income tax Act provides for a relief under Section 89(1) of the IT Act.
The income tax on arrears (6 th pay commision)  of our previous years salary can give us some relief.
 I am attaching a file with this post. check it.
You can revise your form no 2 again.

It works as follows.

Spread the arrears that you have received to the respective years.  For example, if you have received arrears for the last four financial years and the current year break it into three (i.e) for the year 2006-07, 2007-08, 2008-09, 2009-10, 2010-11.

Calculation 1

Calculate income tax for the taxable income without including arrears for 2006-07 and 2007-08 seperately based on tax structure applicable during these years.  Then add apportioned arrears to the respective year’s taxable income and again find the tax.  Find the difference in tax on account of addition of arrears portion.   this difference has to be calculated for 2006-07 and 2007-08 seperately.  Then these two difference tax amounts have to be added to find out the total difference in tax on account of arrears portion added to the taxable income in the relevant years.  This is the resultant amount calculated in “Calculation 1″

Calculation 2

Then  find out the  income tax for the current year without including the arrears.  Then find out the income tax for current year after including the total arrears received which relates to current year and also the previous years.  Difference of these two tax amounts  is the additional tax we have to pay  on account of receipt the arrears for the current year and the previous years.  This is the resultant amount calculated in “Calculation 2″

Now, subtract the resultant amount as per “Calculation 1″ from the resultant amount as per “Calculation 2″.  This gives your income tax relief under Section 89 (1).  Obviously, if resultant amount as per “Calculation 1″  is not less, relief is Nil.

This calculation gains significance as all of us have received the 6CPC arrears during this year which may add to our tax liability.

Since this calculation is little bit complex if not difficult, GConnect has come up with an application to calculate Income tax relief under Section 89(1)
« Last Edit: February 21, 2013, 08:12:10 PM by SkS »

ssgill79

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GOOD WORK. THANKS FOR INFORMATION.

Ajay Pal Singh

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Nice info

teacher MATH

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revised return sare years di fill karne hove gi

teacher MATH

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there is a problem when we fill the arrears all go into taxable income part whereas 50% must go to taxable income part because rest 50% goes to saving if it is less than 100000

SkS

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Dear
You don't have to fill revised return of all the years. u have to submit form 10 e with this year return only as u get arrears this year.
 If u c my attachment u will c form 10 e. Just bifurcate your arrears amount according  to year wise and fill net taxable income                (gross - savings) of those previous years in my attachment. Comp will automatically tell u the relief amt.
thx

SkS

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Dear
Whatsoever amt we get in a financial year is our gross income(20% cash+ 20% gpf)

Ashok Kumar

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Dear
Whatsoever amt we get in a financial year is our gross income(20% cash+ 20% gpf)
No, I fully agree with teacher Math. Suppose Taxable Income for 2005-06 is 97600 and annual savings for 2005-06 is = 70,000 (<Rs. 1,00,000)
Arrear for 2005-06 is = 12,000. (10% Tax 1200 +Cash 5400 + GPF 5400). Annual saving should also be raised to 75400 (70000+5400). In this way Taxable income should be=104200 (97600+6600). Because here deduction is 75400 from Gross But Excel file uploaded on this site adds 12000 to 97600 and makes Taxable Income=109600, i.e.deduction amt. is still 70,000 which is wrong.

teacher MATH

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is nothing to be added to saving from the arrears ?
rest of ur performa  is alright good work

SkS

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Dear
Thx for ur reply.
r u sure of what u r writing or u think so. have u claimed ur 89(1) relief?
i think savings dont get bifurcated.
pls reply
thx

 

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