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relief u/s 89

FATEMA (CHARTERED ACCOUNTANT) (719 Points)

11 December 2009

My client receives arrears of pension from the central government every year.This year it is quite high.

Is he entitled to relief u/s 89?

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18 Replies

karunaiselvan (Financial Analyst) (63 Points)
Replied 11 December 2009

B.Relief for income-tax]

⁴⁵[Relief when salary, etc., is paid in arrears or in advance.

89. Where an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance or is in receipt, in any one financial year, of 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, or is in receipt of a sum in the nature of family pension as defined in the Explanation to clause (iia) of section 57, being paid in arrears, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, the Assessing Officer shall, on an application made to him in this behalf, grant such relief as may be prescribed⁴⁶.]

The following proviso shall be inserted in section 89 by the Finance (No. 2) Act, 2009, w.e.f. 1-4-2010 :

Provided that no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i) of clause (10C) of section 10, a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under clause (10C) of section 10 in respect of such, or any other, assessment year.

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Mohammed Dalal (Chartered Accountant) (163 Points)
Replied 11 December 2009

Originally posted by :FATEMA
"	My client has receives arrears of pension from the central government every year.This year it is quite high. Is he entitled to relief u/s 89?	"

Yes relief will be available u/s 89

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 11 December 2009

Dear Mohammed,

Section 89 does not use the word "pension" anywhere.Can you please justify your answer.

P-A-W-A-N (TAX - MANAGER AT GURGAON) (541 Points)
Replied 11 December 2009

Rule 21A(5)

Read this to clarify your question

Ashutosh Agarwal (Manager (Internal Audit)) (107 Points)
Replied 11 December 2009

Well here what is to be seen is was that arrear amount received was offered for tax in the year it had accrued if yes then there will be no tax implication and if not it would be charged to tax in the year of receipt thats it you cannot take any exemption u/s 89 this sec to avoid double tax and not a tax avoidance tool

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FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 11 December 2009

What does commuted pension mean?

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 11 December 2009

I can give u an example Fatema

say pension of a person is 10000 per month..while retiring a person can commute say half of his pension for next 10 yrs and collect it in advance..so he will get an amount may be some 5 lakhs for example.this 5 lakhs is commuted pension..then for the 10 yrs he can collect 5000( the otr half which he dint commute) as his uncommuted pension

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 11 December 2009

thanks hareesh

Naresh (CA Final/ C.W.A Final) (49 Points)
Replied 11 December 2009

commuted pension is lum sum paid by employer to employee at the time of retirement or superannuation

Originally posted by :FATEMA
"	thanks hareesh	"

neeraj maheshwari (CA Final) (35 Points)
Replied 11 December 2009

section 89 use for releif of gratuity. you are in mistake.

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FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 11 December 2009

Dear Neeraj,

Some calrifications.

Section 89 talks about relief if an individual receives any portion of his salary in arrears or in advance or receives profit in lieu of salary.

Relief for gratutiy can be calimed under setion 89(1).

sudhir rawal (B.COM/PCC/ARTICLE/'O'LEVEL) (314 Points)
Replied 11 December 2009

yes your client can receive relief u/s 89

but he should submit form 10E

https://law.incometaxindia.gov.in/DITTaxmann/IncomeTaxRules/pdf/itr62Form10E.pdf

here is form you can see it

Hareesh H Sharma (Cleared IPCC..now article) (894 Points)
Replied 11 December 2009

Fatema i think u can claim the relief..cos sec 89 says any amount salary and in the definition of salary pension is also included....

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 12 December 2009

Dear Hareesh,

The pension received is an uncommuted pension and the reckenor says it is fully taxable.Relief can be claimed only for commuted pension in case of non-government employees.Commuted pension is fully exempt in case of government-employees.