As you know salary and arrears are charged to tax on due or receivable basis. Based on this rule my friend who is a govt servant had inculded his arrears amount of 40% in the year A.Y.2008-09 though it was paid to him only in the F.Y.2009-10. As he showed his arrears in his salary income in the F.Y.2008-09,he claimed 89 relief for the said arrears in that year itself as it cannot be claimed in the year of receipt. Is it a right claim. Please comment.
17 September 2009
Arrears of salary paid or allowed are includible if not charged to income tax for any earlier previous year [section 15 of Income Tax Act] If the tax in the year of receipt works out to be actually lower than what was payable in the past, no relief under Sec. 89(1) can be claimed. The relief contemplated under Section 89 is aimed at mitigating hardship that may be caused on account of the high incidence of tax due to progressive increase in tax rates Relief has to be claimed only on amount received v/s amount credited ( receivable )
There is an argument that Relief u/s 89 can be claimed only on arrears amount received, because the section 89 says everywhere as arrears amount received and no where it is mentioned as arrears amount received or receivable.How do I crack this argument.
CAclubindia
