{"id":6873,"date":"2019-01-31T09:20:27","date_gmt":"2019-01-31T03:50:27","guid":{"rendered":"http:\/\/www.apnaplan.com\/?p=6873"},"modified":"2019-01-31T09:22:38","modified_gmt":"2019-01-31T03:52:38","slug":"tax-arrears","status":"publish","type":"post","link":"https:\/\/www.apnaplan.com\/tax-arrears\/","title":{"rendered":"Calculate Tax on Arrears in 7 Easy Steps"},"content":{"rendered":"<p style=\"text-align: justify;\">This year\u00a0might have been happy one for you if\u00a0you received long pending salary dues as arrears. But we know receiving arrears makes everyone happy but pain of paying higher taxes makes them worried? <strong>We explain how to calculate tax on arrears and claim tax benefit u\/s 89(1) in income tax return with example.<\/strong><\/p>\n<h2 style=\"text-align: justify;\">Tax Calculation on Arrears:<\/h2>\n<p style=\"text-align: justify;\">We take a simple example. Amit is a government employee and he has received his long awaited salary dues as arrears. Here are the numbers.<\/p>\n<ul style=\"text-align: justify;\">\n<li style=\"list-style-type: none\">\n<ul style=\"text-align: justify;\">\n<li style=\"text-align: justify;\">Salary income for FY 2015-16: Rs 9,00,000<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul style=\"text-align: justify;\">\n<li style=\"list-style-type: none\">\n<ul style=\"text-align: justify;\">\n<li style=\"text-align: justify;\">Additional Arrears received: Rs 5,00,000<\/li>\n<li style=\"text-align: justify;\">Total income: 14,00,000<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: justify;\">This arrears was due from last 3 financial years as follows:<\/p>\n<ol style=\"text-align: justify;\">\n<li style=\"list-style-type: none\">\n<ol style=\"text-align: justify;\">\n<li style=\"text-align: justify;\">FY 2014-15: Rs 2,00,000<\/li>\n<li style=\"text-align: justify;\">FY 2013-14: Rs 1,75,000<\/li>\n<li style=\"text-align: justify;\">FY 2012-13: Rs 1,25,000<\/li>\n<\/ol>\n<\/li>\n<\/ol>\n<p style=\"text-align: justify;\">We use this example to illustrate tax calculation on arrears. For simplicity we would assume that Amit has not invested for any tax exemption, so his income stated above is \u201cNet Taxable Income\u201d.<\/p>\n<blockquote>\n<p style=\"text-align: justify;\"><strong>Download:<\/strong><a href=\"https:\/\/www.apnaplan.com\/save-income-tax-salaried-professionals-fy2018-19\/\">The ultimate ebook guide to Save Tax for FY 2018-19<\/a><\/p>\n<\/blockquote>\n<p style=\"text-align: justify;\"><span style=\"text-decoration: underline; background-color: #ffcc00;\"><strong>Step 1:<\/strong><\/span><\/p>\n<p style=\"text-align: justify;\"><strong>Calculate tax for present year without considering arrears<\/strong><\/p>\n<p style=\"text-align: justify;\">So for FY 2015-16, the taxable income without arrears = Rs 9,00,000<\/p>\n<p style=\"text-align: justify;\">Income Tax Payable = Rs 1,08,150<\/p>\n<p style=\"text-align: justify;\"><span style=\"text-decoration: underline; background-color: #ffcc00;\"><strong>Step 2:<\/strong><\/span><\/p>\n<p style=\"text-align: justify;\"><strong>Calculate tax for present year after adding arrears payout<\/strong><\/p>\n<p style=\"text-align: justify;\">So for FY 2015-16, the taxable income without arrears = Rs 9,00,000 + Rs 4,00,000 = Rs 14,00,000<\/p>\n<p style=\"text-align: justify;\">Income Tax Payable = Rs 2,52,350<\/p>\n<p style=\"text-align: justify;\"><span style=\"text-decoration: underline; background-color: #ffcc00;\"><strong>Step 3:<\/strong><\/span><\/p>\n<p style=\"text-align: justify;\"><strong>Subtract income tax payable you get in step 2 from step 1<\/strong><\/p>\n<p style=\"text-align: justify;\">Additional tax due to arrears: Rs 2,52,350 &#8211; 1,08,150 = Rs 1,44,200<\/p>\n<blockquote>\n<p style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>Also Read: <a href=\"http:\/\/www.apnaplan.com\/best-tax-saving-investments-80c\/\">\u00a0<\/a><\/strong><\/span><a href=\"http:\/\/www.apnaplan.com\/best-tax-saving-investments-80c\/\">Best Tax Saving Investments u\/s 80C<\/a><\/p>\n<\/blockquote>\n<p style=\"text-align: justify;\"><span style=\"text-decoration: underline; background-color: #ffcc00;\"><strong>Step 4:<\/strong><\/span><\/p>\n<p style=\"text-align: justify;\"><strong>Allocate the arrears components to the respective financial years.<\/strong> So in our case it\u2019s as follows<\/p>\n<p style=\"text-align: justify;\">FY 2014-15: Rs 2,00,000<\/p>\n<p style=\"text-align: justify;\">FY 2013-14: Rs 1,75,000<\/p>\n<p style=\"text-align: justify;\">FY 2012-13: Rs 1,25,000<\/p>\n<p style=\"text-align: justify;\"><span style=\"text-decoration: underline; background-color: #ffcc00;\"><strong>Step 5:<\/strong><\/span><\/p>\n<p style=\"text-align: justify;\"><strong>Calculate new tax payable for each financial year where the component of arrears is present<\/strong> i.e. adding arrears to the old income in respective financial years.<\/p>\n<figure id=\"attachment_6875\" aria-describedby=\"caption-attachment-6875\" style=\"width: 757px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"size-large wp-image-6875\" src=\"http:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/02\/Calculating-Tax-on-Arrears-1024x349.png\" alt=\"Calculating Tax on Arrears\" width=\"757\" height=\"258\" title=\"\" srcset=\"https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/02\/Calculating-Tax-on-Arrears-1024x349.png 1024w, https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/02\/Calculating-Tax-on-Arrears-300x102.png 300w, https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/02\/Calculating-Tax-on-Arrears-768x262.png 768w, https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/02\/Calculating-Tax-on-Arrears.png 1449w\" sizes=\"(max-width: 757px) 100vw, 757px\" \/><figcaption id=\"caption-attachment-6875\" class=\"wp-caption-text\"><strong>Calculating Tax on Arrears<\/strong><\/figcaption><\/figure>\n<p style=\"text-align: justify;\">Add the excess tax payable across the financial years due to arrears. In our case it comes out to be Rs 1,03,000. <strong>This means that had the salary payout been on time you would have paid this amount as tax.<\/strong><\/p>\n<p style=\"text-align: justify;\"><span style=\"text-decoration: underline; background-color: #ffcc00;\"><strong>Step 6:<\/strong><\/span><\/p>\n<p style=\"text-align: justify;\"><strong>Subtract the excess tax payable due to arrears in Step 3 from the additional tax payable in Step 5.<\/strong><\/p>\n<p style=\"text-align: justify;\">Tax Difference: Rs 1,44,200 \u2013 Rs 1,03,000 = Rs 41,200.<\/p>\n<p style=\"text-align: justify;\">If you consider arrears payment as income for only present financial year, you would be paying Rs 41,200 extra as taxes, without any fault of yours. <strong>Government thankfully understands the situation and has provided relief for tax payers under Section 89(1).<\/strong><\/p>\n<blockquote>\n<p style=\"text-align: justify;\"><strong>Also Read:<\/strong> <a href=\"http:\/\/www.apnaplan.com\/submit-income-tax-proof-employer\/\">Submit Income Tax Proof to Employer \u2013 How, When and Why?<\/a><\/p>\n<\/blockquote>\n<p style=\"text-align: justify;\"><span style=\"text-decoration: underline; background-color: #ffcc00;\"><strong>Step 7:<\/strong><\/span><\/p>\n<p style=\"text-align: justify;\"><strong>Calculate your final tax liability for FY 2015-16<\/strong><\/p>\n<p style=\"text-align: justify;\">So for FY 2015-16, the taxable income with arrears = Rs 9,00,000 + Rs 4,00,000 = Rs 14,00,000<\/p>\n<p style=\"text-align: justify;\">Income Tax Payable = Rs 2,52,350<\/p>\n<p style=\"text-align: justify;\">Tax Deduction u\/s 89(1) on account of arrears = Rs 41,200<\/p>\n<p style=\"text-align: justify;\"><span style=\"text-decoration: underline;\"><strong>Net Tax payable = Rs 2,52,350 \u2013 41,200 = Rs 211,150<\/strong><\/span><\/p>\n<p style=\"text-align: justify;\"><strong>To claim the above tax benefit u\/s 89(1), you need to fill up Form 10E.<\/strong>\u00a0From FY 2014-15 (assessment year 2015-16), the income tax department has made it mandatory to file Form 10E if you want to claim relief under section 89(1). The form can be filled online on the Income Tax Website.<\/p>\n<p style=\"text-align: justify;\"><strong>The question is what would have happened if there was no excess or lower tax as in Step 6?<\/strong><\/p>\n<p style=\"text-align: justify;\">There would be no special treatment. You just calculate your tax after adding arrears and pay our taxes. Section 89(1) would not be applicable!<\/p>\n<blockquote>\n<p style=\"text-align: justify;\"><strong>Also Read:<\/strong><a href=\"http:\/\/www.apnaplan.com\/regular-income-investment\/\">13 Investments to Generate Regular Income<\/a><\/p>\n<\/blockquote>\n<figure id=\"attachment_8085\" aria-describedby=\"caption-attachment-8085\" style=\"width: 1008px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-8085\" src=\"https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears.png\" alt=\"Calculate Tax on Arrears\" width=\"1008\" height=\"548\" title=\"\" srcset=\"https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears.png 1008w, https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears-300x163.png 300w, https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears-768x418.png 768w\" sizes=\"(max-width: 1008px) 100vw, 1008px\" \/><figcaption id=\"caption-attachment-8085\" class=\"wp-caption-text\"><strong>Calculate Tax on Arrears<\/strong><\/figcaption><\/figure>\n<h2 style=\"text-align: justify;\">Form 10E: How to fill?<\/h2>\n<p style=\"text-align: justify;\">The Form 10E can be filled online from Income Tax website. Here are the steps:<\/p>\n<ol style=\"text-align: justify;\">\n<li>Login to <a href=\"http:\/\/incometaxindiaefiling.gov.in\/\" target=\"_blank\" rel=\"noopener\">Income Tax efiling website<\/a>.<\/li>\n<li>After you have logged in, click on tab named \u2018e-File\u2019 and select \u2018Prepare &amp; Submit Online Form (Other than ITR)<\/li>\n<li>On the next screen, select Form 10E and the Assessment Year from the drop down.<\/li>\n<li>The Form 10E would be displayed with instructions and annexure. Fill the relevant details and submit.<\/li>\n<\/ol>\n<p style=\"text-align: justify;\"><strong>In case you do not submit Form 10E<\/strong> to take advantage of Sec 89(1), you might receive notice from income tax department saying: <em><strong>The relief u\/s 89 has not been allowed in your case, as the online form 10E has not been filed by you.<\/strong><\/em> The furnishing of Online form 10E is required as per sec.89 of the Income Tax Act<\/p>\n<h2 style=\"text-align: justify;\">Tax Calculators:<\/h2>\n<p style=\"text-align: justify;\">You can download the <strong><a href=\"http:\/\/www.apnaplan.com\/category\/calculator\/\">income tax calculator for past financial years here<\/a><\/strong>.\u00a0Use them to calculate your taxes for the respective years.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>This year\u00a0might have been happy one for you if\u00a0you received long pending salary dues as arrears. But we know receiving arrears makes everyone happy but pain of paying higher taxes makes them worried? We explain how to calculate tax on arrears and claim tax benefit u\/s 89(1) in income tax return with example. Tax Calculation [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":8085,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[37,3013,6],"tags":[2982,2985,2984,2983],"uagb_featured_image_src":{"full":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears.png",1008,548,false],"thumbnail":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears-150x150.png",150,150,true],"medium":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears-300x163.png",300,163,true],"medium_large":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears-768x418.png",768,418,true],"large":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears.png",1008,548,false],"1536x1536":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears.png",1008,548,false],"2048x2048":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears.png",1008,548,false],"yarpp-thumbnail":["https:\/\/www.apnaplan.com\/wp-content\/uploads\/2016\/12\/Calculate-Tax-on-Arrears.png",120,65,false]},"uagb_author_info":{"display_name":"Amit","author_link":"https:\/\/www.apnaplan.com\/author\/admin\/"},"uagb_comment_info":87,"uagb_excerpt":"This year\u00a0might have been happy one for you if\u00a0you received long pending salary dues as arrears. But we know receiving arrears makes everyone happy but pain of paying higher taxes makes them worried? We explain how to calculate tax on arrears and claim tax benefit u\/s 89(1) in income tax return with example. Tax Calculation&hellip;","_links":{"self":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/posts\/6873"}],"collection":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/comments?post=6873"}],"version-history":[{"count":0,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/posts\/6873\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/media\/8085"}],"wp:attachment":[{"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/media?parent=6873"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/categories?post=6873"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.apnaplan.com\/wp-json\/wp\/v2\/tags?post=6873"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}