Calculation of relief u/s 89(1) when salary has been received in
arrears or in advance
The relief
on salary received in arrears or in advance (hereinafter to be refereed as
additional salary is computed in the manner laid down in rule 21A (2) as under;
a)
Calculate the tax payable on the total income,
including the additional salary, of the relevant previous year in which the
same is received.
b)
Calculate the tax payable on the total income,
excluding the additional salary, of the relevant previous year in which the
additional salary is received.
c)
Find out the difference between the tax at (1)
and (2).
d)
Compute the tax on the total income after
including the additional salary in the previous year to which such salary
relates.
e)
Compute the tax on the total income after
additional salary in the previous year to which such salary relates.
f)
Find out the difference between tax at (4) and
(5)
g)
The excess of tax compute at (3) over tax
computed at (6) is the amount of relief admissible under section 89. No relief
is, however, admissible if tax computed at (3) is less then tax computed at
(6). In such a case, the assessee- employee need not apply for relief.
If the
additional salary relates to more than one previous year, salary would be
spread over the previous year to which it pertains in the manner explained
above.