Moment guide · FY 2026-27

I received salary arrears

Can I reduce tax on salary arrears received for past years?

Yes. If you received arrears relating to earlier years, you can reduce your current-year tax by claiming relief under section 89(1). You must file Form 10E on the income-tax portal before filing your return, or the CPC will disallow the relief.

The explained version

What the statute actually does, in plain order.

Arrears are taxable in the year of receipt

Under section 15, salary is taxable when it is due or received, whichever is earlier. So arrears received this year are added to your current-year income, even though they relate to earlier years. Adding a large arrear amount to one year can push you into a higher tax slab.

Relief under section 89(1)

Section 89(1) ensures you don't pay more tax simply because arrears bunch into one year. You recalculate the tax for each year to which the arrears relate, once with the arrears and once without them. The extra tax caused by the arrears in those past years is the relief amount, which is then deducted from your current-year tax liability.

Form 10E is mandatory

Before filing your return, file Form 10E on the income-tax e-filing portal. The Central Processing Centre (CPC) will disallow the section 89(1) relief entirely if Form 10E is missing. You cannot get around this by simply claiming the relief in your ITR.

Common answers people give

Only one of these is right — the rest are where the anxiety comes from.

✗Yes, I can claim relief under section 89(1) and it eliminates the extra tax
✗No, arrears are always taxed in the year of receipt at the full slab rate
✓Yes, but only if I file Form 10E before submitting my ITR
✗Only if my employer mentioned it in Form 16

The #1 trap

Computing and claiming 89(1) relief in the return but forgetting to file Form 10E first. CPC automatically rejects the relief claim if Form 10E is absent, so file it on the income-tax portal before submitting your ITR.

The decision path

Follow it top to bottom — the first condition that matches is your answer.

Step 1

Did you receive arrears relating to an earlier financial year?

Yes: Compute the relief under section 89(1) using the salary income and tax slabs of each relevant earlier year.
No: You cannot claim 89(1) relief; filing Form 10E without actual arrears may cause the return to be invalid.

Step 2

Have you filed Form 10E on the income-tax portal?

Yes: File your ITR claiming the 89(1) relief; CPC will allow it based on Form 10E.
No: File Form 10E before submitting your return; otherwise CPC will disallow the relief.

Worked example

Meera is a school teacher in Delhi who received ₹1,50,000 as salary arrears in July 2025. The arrears related to pay revisions for FY 2022-23 and FY 2023-24.

Meera's current-year income jumped from ₹5,00,000 to ₹6,50,000 because of the arrears. She recomputed her tax for FY 2022-23 and FY 2023-24 with and without the arrears. The arrear amount increased her tax in those earlier years by roughly ₹9,200 in total. She deducted that ₹9,200 from her current-year tax liability while preparing her return. Before filing her ITR on 15 July 2026, Meera filed Form 10E on the income-tax portal. Thanks to the timely filing, CPC accepted her 89(1) relief and she paid ₹9,200 less tax.

Questions people actually ask

What is Form 10E and where do I file it?

Form 10E is an online statement of arrear salary, filed at incometax.gov.in under 'e-File > Income Tax Forms'. It must be filed before you submit your ITR to claim relief under section 89(1).

Can I claim 89(1) relief for arrears from more than 5 years ago?

Yes. Relief applies to arrears relating to any past year. You need the salary and tax details of each year to which the arrears relate to compute the relief correctly.

Does section 89(1) apply only to salary arrears?

It also applies to gratuity (to the extent not exempt), compensatory payments, and voluntary retirement compensation not covered by section 10(10C). The same Form 10E requirement applies.

→Or talk to us about your numbers →

Last verified 2026-08-11 · Reviewed by Harun Raaj & Associates, Chartered Accountants. Every figure cites the Income-tax Act, 1961 (with ITA 2025 mapping via our section index).