Form 10E Of Income Tax: Importance, Filing Process, And Eligibility
Did you face a delay in receiving your salary, resulting in higher tax liability? No need to worry because Section 89(1) of the Income Tax Act, 1961 protects you against the burden of paying past dues in the current year.
By filing Form 10E, salaried employees can claim relief on salary arrears. Keep reading if you want to know more about Form 10E and avail its benefits.
Importance of Form 10E of income tax to Attain Tax Relief
Generally, income tax liabilities are calculated on the income received in a particular financial year. A salaried employee has to pay taxes on the following arrears:
- Salary Arrears
- Family pension arrears
- Advance salary
- Lump-Sum payment received after retirement (commuted pension)
- Compensation received after termination of employment
But as a taxpayer, there might be instances when you earn your income and aforementioned arrears in the financial year but acquire it in the following year.
The main purpose of providing this tax relief is to ensure that a higher tax bracket is not applicable to an individual in case he/she receives salary arrears in a particular year.
If your income in the current year includes salary arrears and past dues, by filing Income Tax Form 10E on the e-filing portal of the Income Tax Department, you can be protected against any extra tax liability.
Who is Eligible for Tax Relief under Section 89(1)?
The following are eligible to file Form 10E to get relief on salary arrears:
- Employees of a recognised company
- Government employees
- Employees of a co-operative society
- Employees of an educational institution
- Local authority workers
- Employees of an association or body
Still, not everyone who is eligible to file the form can claim tax relief under Section 89(1) of the Income Tax Act. Only those who, upon calculation, have incurred extra tax liability because of delay in receiving salary should file form 10E.
How to Calculate Tax Relief?
To understand if you qualify for Section 89(1) benefit, you need to calculate your tax relief. Rule 21A of Section 89(1) of the Income Tax Act lays down a procedure for this calculation.
Step 1
Calculate tax payable on your total income, including arrears and advance salary, for the current financial year when you earned the income. Let’s call it A.
Step 2
Calculate tax payable on your income, but excluding arrears and advance salary, for the current financial year. Let’s call it B.
Step 3
Subtract the difference between values obtained in Step 1 and Step 2. That is, A-B. Let’s call this value “X”.
Step 4
Compute tax payable on your income, excluding arrears, for the year in which the arrears arose. Let’s call it C.
Step 5
For the same year, compute the tax payable on your income, this time, including the arrears. Let’s call it D.
Step 6
Again, subtract the value obtained in Steps 4 and 5. That is, C-D. Let’s call it “Y”.
Step 7
If the value obtained in step 3 (X) is higher than the value in step 6 (Y), only then are you eligible for tax relief.
Upon calculating the excess tax via this procedure, a taxpayer proceeds towards filing Form 10E on the online portal.
How to File Form 10E?
A taxpayer claiming tax relief under Section 89(1) of the Income Tax Act needs to follow the given procedure to file Form 10E of income tax:
Step 1
Go to the official online Income Tax Department portal.
Step 2
Log into your Income Tax e-filing account, using your User ID, password and date of birth.
Step 3
Upon logging in, click on the ‘e-File’ tab on the Dashboard. After that, select the option of ‘Income Tax Forms’.
Step 4
On the next screen, fill in your PAN and in the dropdown menu called ‘Form name’, click on ‘FORM NO 10E – Form for relief u/s 89’.
Step 5
On the same screen, enter the relevant Assessment Year and press ‘Continue’. If the arrears on your salary are for the financial year 2020-2021, the assessment year will be 2021-2022.
Step 6
On the next page, you will receive instructions on how to properly fill Form 10E online. Here, you select ‘Let’s Get Started’.
Step 7
On this page, choose the relevant section; the options are divided into the following Annexures.
Annexure-I: For salary arrears, advance salary, family pension or premature withdrawal from Employee Provident Fund.
Annexure-II: Gratuity amount received for services as an employee for a time period of 5 to 15 years.
Annexure-IIA: Gratuity amount received for services rendered for a time period of more than 15 years.
Annexure-III: For compensation received upon termination of employment.
Annexure-IV: For Commutation of Pension.
Step 8
Once the form is filled up according to the instructions, you can click on ‘Preview’ before submission.
Step 9
If you are ready to submit, you can select ‘Proceed to e-Verify’ at the bottom of the page. After e-verification, you will receive an acknowledgement message regarding successful submission, including the Transaction ID and Receipt Number.
Step 10
If at any point you are unable to complete the form in one sitting, then you can click on ‘Save Draft’. It is present at the bottom of the page, and it will save all the progress you have made before you exit.
Step 11
By repeating the same procedure mentioned above, you can access the saved information and complete filling the form.
Key Elements to Remember while Filing Form 10E of income tax
Filing Form 10E is a straightforward process. Yet, many taxpayers miss out on the following critical points, leading to failure of attaining tax relief.
- If you want to claim benefits under Section 89(1) of the Income Tax Act, filing Form 10E before submitting ITR is necessary. Taxpayers, who have forgotten or failed to file this form before ITR, will not be eligible for any tax relief.
- If you claim tax relief but fail to file Form 10E of income tax, then a non-compliance notice from the Income Tax Department will be served to you. This notice will state that you have been denied any tax exemption.
- As the form is filed online, it is not important to attach it while submitting ITR. Yet, keeping a hard copy might be useful for future reference.
Also read: Section 112A of the Income Tax Act
Final Word
If you do not want to pay unnecessary and exorbitant taxes, submission of Form 10E under Section 89(1) of the Income Tax Act is imperative. The only way to reduce your tax liability and save yourself from salary arrears is by following the proper procedure and filing this form on time. But before claiming tax exemption, make sure to check your eligibility and calculate the tax relief.
Frequently Asked Questions
Yes, you can view your form after submitting it by logging into the e-filing portal and going to ‘My Account.’ On this page, click on ‘View e-Filed Returns / Forms’ and select Form 10E from the dropdown menu. This will lead you to the details of this form and its status.
You will get to know whether your tax relief claim was disallowed. After processing your income tax return, the Income Tax Department will communicate any failure of processing tax exemption and Form 10E via an intimation u/s 143(1).
No, it is not compulsory for you to inform your employer after filing Form 10E. Even though some employers might ask for a confirmation after submission of Form 10E, you may choose not to provide this information to your employer.
No, Form 10E can only be successfully submitted through the online portal of the Income Tax Department. You can log in to the official portal of the IT Department and file Form 10E by following the necessary steps.
No, you cannot make changes to Form 10E after filing it. But you can file a fresh form, ensuring that you have not made the same mistakes. The Income Tax Department will consider the latest form.
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