FORM NO.

10E [See rule 21AA]

Form for furnishing particulars of income under section 192(2A) for the year ending 31st
March,2010 for claiming relief under section 89(1) by a Government servant or an employee in
a company, co-operative society, local authority, university, institution, association or body
1. Name
2.Address
3. PAN
4. Status
Particulars of income referred to in rule 21A of the Income tax Rules, 1962, relevant to 2005-
06, 2006-07, 2007-08, and 2008-2009 received during 2009-10 [second installment of 6CPC
Arrears]
1. (a) Salary received in arrears or in advance during 2009-10 in accordance with the
provisions of sub-rule (2) of rule 21A
(b) Payment in the nature of gratuity in respect of past services, extending over a period
of not less than 5 years in accordance with the provisions of sub-rule (3) of rule 21A
(c) Payment in the nature of compensation from the employer or former employer at or
in connection with termination of employment after continuous service of not less than 3
years or where the unexpired portion of term of employment is also not less than 3 years
in accordance with the provisions of sub-rule (4) of rule 21A
(d) Payment in commutation of pension in accordance with the provisions of sub-rule (5)
of rule 21A
2. Detailed particulars of payments referred to above may be given in Annexure I, II,
IIA, III or IV, as the case may be
Annexure-I

Verification

I do hereby declare that what is stated above is true to the best of my knowledge and belief. Verified
today

Date :

Signature of the Pensioner

 ANNEXURE -I
1. Total net taxable Income excluding Salary received in Arrears or advance
2. Salary received in arrears or advance
3. Total income (as increased by salary received in arrears or advance)[Add item 1
and item 2]
4. Tax on total income (as per item 3)
5. Tax on total income (as per item 1)
6. Tax on salary received in arrears or advance [Difference of item 4 and item 5]
7. Tax computed in accordance with Table "A" [Brought from column 7 of Table
"A"]
8. Relief under section 89(1) [Indicate the difference between the amounts
mentioned against items 6 and 7]
TABLE "A" [See item 7 of Annexure I]
Previous Total Net Salary received Total income (as Tax on total Tax on total Difference in
Year(s) Taxable in arrears or increased by income [ As income tax [Amount
income of the advance relating salary received in per Col.(2)] [ As per Col. under col.(6)
relevant to the relevant arrears or (4)] minus amount
previous year previous year as advance) of the under col.(5)]
mentioned in col. relevant previous
(1). year mentioned
in col.(1) [Add
Col.(2) and (3)
1 2 3 4 5 6 7
2006-07
2007-08
2008-09
2009-10
Total
13[Furnishing of particulars for claiming relief under section 89(1).

21AA. Where the assessee, being a Government servant or an employee

in a 14[company, co-operative society, local authority, university, institution,
association or body], is entitled to relief under sub-section (1) of section 89, he
may furnish to the person responsible for making the payment referred to in
sub-section (1) of section 192, the particulars specified in Form No. 10E.]
Section 89 (1)
This is available to an employee when he receives salary in advance or in arrear
or when in one financial year, he receives salary of more than 12 months or
receives 'profits in lieu of salary' W.e.f. 1.6.89, relief u/s 89(1) can be granted at
the time of TDS by employees of all companies co-operative societies,
universities or institutions as well as govt./public sector undertakings. The relief
should be claimed by the employee in Form No. 10E and should be worked out
as explained in Rule 21A of the Income Tax Rules.

SECTION 89  RELIEF WHEN SALARY ETC., IS

PAID IN ARREARS OR IN ADVANCE

628. Scope of relief under the section in five situations explained

1. Section 89(1) authorises grant of relief in a case where an employee receives

salary in arrears or in advance or has received in any financial year salary for
more than twelve months, a payment which under the provisions of section
17(3)(ii) is a profit in lieu of salary. The effect of such increase is that the
income will be assessed at a higher rate than it otherwise would have been
assessed and it is for this reason that section 89(1) authorises relief to be
allowed. The relief is to be allowed in terms of rule 21A of the Income-tax
Rules, 1962.

2. Rule 21A(1) enumerates the following five different situations wherein the
assessees will be entitled to relief (four of these are specific situations while the
fifth is a residuary one) :

a. salary being received in arrears or advance;

b. where the payment is in the nature of gratuity in respect of past services

extending over a period of not less than five years is received;

c. where the payment is in the nature of compensation received by the

employee from his employer or former employer at or in connection with
termination of his employment after continuous service of not less than three
years and where the unexpired portion of the term of employment is also not
less than three years;
 d. where the payment is in the nature of commutation of pension;

e. where the payment is not covered by the description given in (a) to (d)
above.

The relief is to be worked out in the first four situations in accordance with the
specific modes described in rule 21A (2)(a) to (d).

3. The authority to grant relief in the four specific cases is the Income-tax
Officer assessing the employee. In the residuary case, it is Central Board of
Direct Taxes.

4. The relief under section 89(1) is to be given in the assessment in which the
extra payment by way of arrears, advance, etc., is taxed. The mode of granting
relief spelt out in rule 21A(2) to 21A(5) would show that in all the four different
cases the exercise of giving relief is initiated by bringing to tax the whole of the
extra amount in the assessment for the assessment year relevant to the year of
receipt. Basically, the relief under section 89(1) is arithmetical. It involves
finding out of two rates of tax. The first is the rate of tax applicable to the
total income including the extra amount in the year of receipt. The second is
finding out the rate by adding the arrears to the total income of the years to
which they relate. For this purpose the assessee should be asked for a true
and authentic statement of the total income of the earlier years to which the
arrears pertain There is no warrant for issuing a notice under section 148
or calling for returns of income of the earlier years.

Circular : No. 331 [F. No. 174/102/79-IT(A-I)], dated 22-3-1982.

629. Relief in case of encashment of leave salary by an employee while in

service - Whether admissible

1. Section 89(1) provides for relief to an assessee when salary, etc., is paid in
arrears or in advance or if he receives in one financial year salary for more than
12 months or a payment which under the provisions of clause (3) of section 17
is a profit in lieu of salary and therefore, his income is assessed at a rate higher
than at which it would have otherwise been assessed. This relief is granted by
the Income-tax Officer on an application made to him in this behalf.

2. The question of admissibility of relief under section 89(1) in respect of

amounts received on encashment of leave salary while in service was
considered by the Board. The Board are advised that relief under section 89(1)
read with rule 21A of the Income-tax Rules would be admissible in respect of
encashment of leave salary by an employee when in service. The encashment of
leave salary on retirement whether on superannuation or otherwise has already
been exempted, by insertion of clause (10AA) in section 10, by the Finance Act,
1982 with effect from 1-4-1978.
Circular : No. 431 [F. No. 174/43/82-IT (A-II)], dated 12-9-1985.

630. Computation of relief under the section - Basis therefor

1. In modification of the instructions contained in the Board’s Circular No. 65

(LIII-I)-IT/49, dated 2-11-1951 regarding computation of relief under section
60(2) of the 1922 Act, it has been decided that the relief under section
60(2)/89(1) shall hereafter be calculated on the following basis.

2. (a) Where the payment to an employee is reasonably attributable to past

services of less than 5 years (and is not of the nature of arrears of pay), no relief
shall be admissible.

(b)Where the payment to an employee is reasonably attributable to past

services of not less than 5 years but less than 15 years, relief will be allowed by
subjecting the gratuity payment to tax at the average of the average rates
determined by dividing the gratuity amount into two equal portions and adding
a portion to the employee’s income in 1[each of] the last two years of his
service during which he was in receipt of salary for a full period of 12 months.

(c) Where the payment to an employee is reasonably attributable to past

services of 15 years or more, the relief will be calculated by taxing the gratuity
payment at the average of the average rates determined by dividing the gratuity
amount into three equal portions and adding a portion to the employee’s income
in 1[each of] the last three years of service during which he received salary for
the full period of 12 months.

3. Where the payment is for arrears of salary, the relief shall as at present be
calculated by treating the arrears as the income of the years to which the arrears
relate.
1
[4. Notwithstanding the above, relief due on account of a payment having been
assessed in the assessment year 1965-66 and earlier years will continue to be
governed according to the old formula.]

Circular : No. 9-D (LIII-6), dated 17-3-1966 as modified by Circular No. 14-D
(LIII-7), dated 19-4-1966.

631. Relief in the case of amounts repaid under Additional Emoluments

(Compulsory Deposit) Act - Procedure laid down for working out relief under
the section

1. Section 8(2) of the Additional Emoluments (Compulsory Deposit) Act, 1974

provides that for the purposes of computing the total income under the Income-
tax Act, the amount repaid to an individual is deemed to be salary paid in
arrears and the provisions of section 89(1) of the Income-tax Act shall apply.
Under section 89(1), relief to be accorded in such cases is to be worked out on
the basis of the rules as prescribed in rule 21A(2)(a) of the Income-tax Rules,
1962.

2. Representations have been received by the Board that the claiming of relief
under section 89(1), as prescribed, is causing considerable hardship to certain
categories of employees, particularly, in those cases of employees where the
income of the employee was not taxable but for the repayment of compulsory
deposits.

3. The Board have considered these representations and have decided with a
view to removing hardship that the following procedure may be adopted by the
Disbursing Officers :

a. compute the total income of the relevant previous year excluding the
amount, received as repayment of deposit ;

b. allocate the amount received as repayment to the years to which the deposit
relates ;

c. add to the amount allocated to each year, the total income of the year; and

d. compute the tax payable on such total income for each year at the rate
applicable to that year.

4. If thereafter, it is found that no tax is payable as per (d) above for any of the
years to which the repayment has been allocated, the Disbursing Officer need
not deduct tax at source from the total income of the employee in the year in
which the deposit is being repaid notwithstanding the fact that in the year in
which the deposit is repaid the income is taxable.

5. If, however, it is found that by allocating the repayment to the relevant years
tax is payable for any year, the Disbursing Officers must deduct tax on the total
income including repayment at the rate applicable to the year in which
repayment is made. Such employees will have to apply to the Income-tax
Officer for claiming relief under section 89(1).

Circular : No. 239 [F. No. 174/72/78-IT(A-I)], dated 16-5-1978.

Relief when salary is paid in arrears or in advance, etc.

21A. (1) Where, by reason of any portion of an assessee’s salary being paid in arrears
or in advance or by reason of his having received in any one financial year salary for
more than twelve months or a payment which under the provisions of clause (3) of
section 17 is a profit in lieu of salary, his income is assessed at a rate higher than that
at which it would otherwise have been assessed, the relief to be granted under sub-
section (1) of section 89 shall be—

(a) where any portion of the assessee’s salary is received in arrears or in advance, in
accordance with the provisions of sub-rule (2);

(b) where the payment is in the nature of gratuity in respect of past services of the assessee
extending over a period of not less than five years, in accordance with the provisions of sub-rule (3);

(c) where the payment is in the nature of compensation received by the assessee from his
employer or former employer at or in connection with the termination of his employment after
continuous service for not less than three years and where the unexpired portion of his term of
employment is also not less than three years, in accordance with the provisions of sub-rule (4);

(d) where the payment is in commutation of pension, in accordance with the provisions of
sub-rule (5); and

(e) where the payment is not in the nature of salary paid in arrears or in advance or gratuity in
respect of past services or compensation received at or in connection with the termination of
employment or in commutation of pension, in accordance with the provisions of sub-rule (6).

(2) (a) In a case referred to in clause (a) of sub-rule (1), the tax payable by the
assessee on his total income of the previous year in which the salary is received in
arrears or in advance (such salary and such previous year being hereafter in this
sub-rule referred to respectively as the additional salary and the relevant
previous year) shall be reduced by the amount, if any, by which the tax on the
additional salary, calculated in the manner specified in clause (b), exceeds the tax
or the aggregate tax on the additional salary, calculated in the manner specified
in clause (c) or clause (d), as the case may be.

(b) Tax shall be calculated on the total income of the relevant previous year as
reduced by the additional salary, as if the total income so reduced were the total
income of the assessee, and the amount by which the tax so calculated falls short of
the tax on the total income before such reduction shall, for the purposes of clause (a),
be taken to be the tax on the additional salary under this clause.

(c) Where the additional salary relates to only one previous year, tax shall be
calculated on the total income of the said previous year as increased by the additional
salary, as if the total income so increased were the total income of the assessee, and
the amount by which the tax so calculated exceeds the tax payable by the assessee in
respect of the total income of the said previous year shall, for the purposes of clause
(a), be taken to be the tax on the additional salary under this clause.

(d) Where the additional salary relates to more than one previous year,—
 (i) the previous years to which the additional salary relates and the amount relating to each
such previous year shall first be ascertained;

(ii) tax shall, then, be calculated on the total income of each such previous year as increased
by the amount relating to such previous year ascertained under sub-clause (i), as if the total income so
increased were the total income of that previous year, and

the amount by which the aggregate amount of tax in respect of the aforesaid previous
years as calculated under sub-clause (ii) exceeds the aggregate amount of tax payable
by the assessee in respect of the total income of the said previous years shall, for the
purposes of clause (a), be taken to be the aggregate tax on the additional salary under
this clause.

(3) (a) In a case referred to in clause (b) of sub-rule (1), the tax payable by the
assessee on his total income of the previous year in which the payment by way of
gratuity is received (such previous year being hereafter in this sub-rule referred to as
the relevant previous year) shall be reduced by the amount, if any, by which the tax on
the amount of the gratuity included in the total income of the relevant previous year,
calculated at the average rate of tax applicable to such total income, exceeds the tax on
the amount of such gratuity, calculated at the rate of tax determined under clause (b)
or, as the case may be, clause (c).

(b) Where the payment by way of gratuity is made in respect of past services of the
assessee extending over a period of not less than five years but less than fifteen years,
—

(i) the total income of the assessee in respect of each of the two previous years immediately
preceding the relevant previous year shall be increased by an amount equal to one-half of the amount
of the gratuity included in the total income of the relevant previous year, and the average rate of tax
for each of the said two previous years shall be calculated as if the total income so increased were the
total income of that previous year; and

(ii) the average of the average rates of tax for the two previous years immediately preceding
the relevant previous year, calculated in accordance with sub-clause (i), shall, for the purposes of
clause (a), be the rate of tax determined under this clause.

(c) Where the payment by way of gratuity is made in respect of past services of the
assessee extending over a period of not less than fifteen years,—

(i) the total income of the assessee in respect of each of the three previous years immediately
preceding the relevant previous year shall be increased by an amount equal to one-third of the
amount of the gratuity included in the total income of the relevant previous year, and the average rate
of tax for each of the said three previous years shall be calculated as if the total income so increased
were the total income of that previous year; and

(ii) the average of the average rates of tax for the three previous years immediately preceding
the relevant previous year, calculated in accordance with sub-clause (i), shall, for the purposes of
clause (a), be the rate of tax determined under this clause.

(4) (a) In a case referred to in clause (c) of sub-rule (1), the tax payable by the
assessee on his total income of the previous year in which the payment by way of
compensation is received (such previous year being hereafter in this sub-rule referred
to as the relevant previous year) shall be reduced by the amount, if any, by which the
tax on the amount of the compensation included in the total income of the relevant
previous year, calculated at the average rate of tax applicable to such total income,
exceeds the tax on the amount of such compensation, calculated at the rate of tax
determined under clause (b).

(b) The total income of the assessee in respect of each of the three previous years
immediately preceding the relevant previous year shall be increased by an amount
equal to one-third of the amount of the compensation included in the total income of
the relevant previous year, and the average rate of tax for each of the said three
previous years shall be calculated as if the total income so increased were the total
income of that previous year; and the average of the average rates of tax so calculated
for the three previous years shall, for the purposes of clause (a), be the rate of tax
determined under this clause.

(5) (a) In a case referred to in clause (d) of sub-rule (1), the tax payable by the
assessee on his total income of the previous year in which the payment in
commutation of pension is received (such previous year being hereafter in this sub-
rule referred to as the relevant previous year) shall be reduced by the amount, if any,
by which the tax on the payment in commutation of pension included in the total
income of the relevant previous year, calculated at the average rate of tax applicable to
such total income, exceeds the tax on the amount of such payment, calculated at the
rate of tax determined under clause (b).

(b) The total income of the assessee in respect of each of the three previous years
immediately preceding the relevant previous year shall be increased by an amount
equal to one-third of the amount of payment in commutation of pension included in
the total income of the relevant previous year, and the average rate of tax for each of
the said three previous years shall be calculated as if the total income so increased
were the total income of that previous year; and the average of the average rates of tax
so calculated for the three previous years shall, for the purposes of clause (a), be the
rate of tax determined under this clause.

(6) In a case referred to in clause (e) of sub-rule (1), the Board may, having regard to
the circumstances of the case, allow such relief as it deems fit.]