BUSINESS REVIEW

Abhijit Kamath div: A

Tax deduction on arrears of salary decoded

Arrears means outstanding salary, commission, incentives of an employee of a financial year When arrears arrises it increases the tax liability of that particular year as the exact payable tax is not payable by the employee

 Due to this inappropriate tax payment Government has launched sec 89(1) In this section, the tax deduction will be calculated between the entire amount of salary receivable and the actual salary received The tax payer has to pay a lump sum amount of tax in one financial year it-self Sec 89(1) reduces the final amount of tax payable, it will also reduces the TDS on salary

 As the TDS is lowered down all the employees are requested to inform their employers to deduct tax according to the form 10E This form represents a true statement of the total income of the earlier years to which the arrears pretain If the tax payable in the receipt year is actually less then that of amount paid in the past the no relief under sec89(1) could b claimed