Taxation

Step 1: Calculate tax payable on the total income, including additional salary – in the year it is received.

Step 2: Calculate tax payable on the total income, excluding additional salary in the year it is received. You can get the amount of the additional salary (Arrears) from the arrear document given by your employer.

Now you have to subtract the arrear from the total salary received (including the arrears), which can be taken from your Form 16.

After knowing the amount after arrear, you need to calculate the tax over the same.

Step 3: Calculate the difference between Step 1 and Step 2.

Step 4: Calculate tax payable on the total income of the year to which the arrears relate, excluding arrears.

Step 5: Calculate tax payable on the total income of the year to which the arrears relate, including arrears

Step 6: Calculate the difference between Step 4 and Step 5.

Step 7: Excess of amount at Step 3 over Step 6 is the tax relief that shall be allowed.

If the amount in Step 6 is more than the amount in Step 3 no relief shall be allowed.

Alternatively, you may follow the steps on the income tax website to calculate the tax the arrears.

Once you have calculated this amount you can enter the values on ClearTax and proceed to file your return.

Since you received arrears of ₹7,08,204 in FY 2019–20 for the period 2000 to 2008, you can claim tax relief under Section 89(1) of the Income Tax Act while filing your Income Tax Return (ITR).

This provision allows you to spread the arrears over the relevant years, reducing the tax burden caused by receiving a lump sum amount.

To claim the relief:

• File Form 10E online on the Income Tax portal before filing your ITR.

• The relief is calculated as the difference between the extra tax payable in the year of receipt and what would have been payable if the arrears were taxed in the respective years.

Consult a tax professional or use an online calculator for accurate relief calculation while filing your Income Tax Return.