INCOME TAX - RELIEF ON ARREARS RECEIVED

INCOME TAX - RELIEF ON ARREARS RECEIVED

  RELIEF ON INCOME TAX ON ARREARS OF OROP-2

1.  There have been Many queries from our readers on as to how to work out relief on Arrears of OROP-2 which has jumped up the Taxable income for the Financial Year 2023-24., which had been received during the year and also what we should do before filing the current ITR before 31st of Jul 2024

3.  The installments of OROP-2 or portion of it that falls under the FY 2023-24 has added to your income thereby enhancing the amount of Income Tax that will be assessed that becomes due accordingly 

4.   One can claim rebate to the extent what one would have paid had the arrears were received during the earlier years to which they pertain to by filling up Form 10-E. on line while working on line with your ITR but before filing the ITR.  The arrears recived are given consolidated for the period and not year wise. It is therefore necessary to first split the arrears recived to Financial Year wise starting from 01 Jul 2019 (Fin Year 2019-20) . It is easy since you know the enhancement in basic pension per month and you know the DA applicable for the periods, its simple primary school math hereafter. Take Financial year from the enhancement in Feburary to March. 

5.   This excercise will be applicable only to those individuals who were in the lower bracket/slab during the previous years as per their ITR and by adding the splitted portion they still pay lower tax that what they would be paying this year on the arrears. If not then there will be no relief applicable and you save the hassel of computing the relief. 

6.  The method and procedure is just the same as given in the succeeding paras in the post. Go ahead and claim the relief please.

NOTE : Just to remind the readers  not to delay filing your return this year as the  Income Tax department will charge you delay penalty of Rs 5000/- . It is no Rocket science but a child’s play. It is very very easy to file the ITR on line, child's play because  your data is prefilled by the portal and all calculations are done automatically, you  need to  just put in figures of your pension and income from other sources rest is done  by the on line software, do veryfy the figures as per interest certs received from the  banks. Please refer to our post on the same at 

"E FILING ITR-1 ON LINE"    OR copy paste this in your browser 

  http://signalsfamily.blogspot.com/2018/07/e-filing-itr-1-on-line.html

    During the Past Years our team had brought out for you a detailed post on this subject, where in we had attempted to reduce this complicated process into a "PRIMARY SCHOOL SOLUTION" in working out the Relief on Income Tax on such like Arrears and to prepare and submit FORM 10-E on line while e-filing your ITR under Sec 89(I) of the IT ACT. 

     This post had benefitted a large number of pensioners in saving their Income Taxes in thousands. Do read the old post accessible at the web page -  http://signalsfamily.blogspot.com/2016/05/relief-on-income-tax-for-arrears.html  for detailed explanations on the methodology. 

     This endeavour helped a large number of officers who made efforts to "DO IT YOURSELF" in claiming their relief, the max being Rs 80,000/- and lowest as much as Rs 1650. We received abundance of encouraging words from them.  Some Veterans even resorted to filing their REVISED RETURNS to claim the IT relief after reading our web-post. 

       We are thus encouraged to bring out this post which covers the arrears paid during FY 2023-24 on OROP - 2. for our Veterans.

WHY THE RELIEF UNDER SEC 89(1).

    Before we proceed further let us understand the principle under which such a relief is entitled. You are receiving these arrears late by 3 to 4 year or more as the Govt could not pay you these amounts during those earlier years for some reasons.   "MOST OF US ARE IN THE 30% BRACKET TODAY BECAUSE OF THE ARREARS RECEIVED BY US, AS SUCH WE WILL PAY HIGHER TAX ON THE ARREARS THAN WE HAD OTHERWISE PAID HAD THESE ARREARS WERE PAID TO US IN THE EARLIER FYs IF WE WERE IN A LOWER BRACKET THAN 30%. 

     THIS AMT OF ADDL TAX AS COMPARED TO THE EARLIER YEARS IS YOUR RELIEF UNDER SEC 89(1)".

Important Note -- As a thumb rule 'Other than PMR Cases' No Relief will accrue in case one was taxed at the same or higher IT slabs in the previous four Years (FYs 2019-20 . 1920-21 , 1921-22 and 2022-23), as for the current year.  आप पिछले 4 सालों की टैक्स return देखें कि आप कौन सी टैक्स स्लैब में थे अगर वेह आज कि लागू स्लैब से कम में है तो टैक्स में बचत मिलेगी. 
       

Let us now proceed to deal with the arrears as received during the last Financial years  for which we will soon be filing our ITRs for Assessment Year 2024-25. 

PLEASE FOLLOW THE FOLLOWING POST AS IN THE PAST YEAR FOR YOUR GUIDE LINES ------

HOW TO ACCOUNT FOR OROP INSTALMENTS 

    Total Arrears on OROP  so  accrued wef 01 Jul 2019 till paid, infect  pertain to the period from 01 July 2019 to the month when paid with pension for Relief purposes. These can be easily split for the past four years.  to claim relief. 

     SPLITTING OF ARREARS -  Please use the chart as given below and use your own figures to prepare the excel sheet or for manual calculations.

This image can be enlarged by clicking over it .

INCOME TAX RATES -   Please apply the prevailing Income Tax Rates for the previous years. There is no chnage to the OLD Regime while New Regime needs to be examined for the previous years.

FORM 10 E -Preparation and Submission

 While the relief amount is reflected in the appropriate field in the ITR while filing where the amount of relief gets reduced from the total Tax, the pensioners are required to submit FORM 10 E in support of their relief claimed from the arrears before filing the retun. 

 This on line form is of two pages as shown below. 

      Page one is the summary and verification from the pensioner. 

      Page two is "Annx -1" which contains Particulars and Table A which simply  tabulates the calculations made by you on piece of paper as mentioned earlier.

   The sample FORM 10 E as seen below was filled up for OROP-1 and 7 CPC arrears as copied from our earlier post, as such you will need to fill up your own figures after working out the details of Tax during the previous years. 

     In our previous post the details of working out are given in STEPs, we are giving a summary of the same as follows and for better understanding one can firs read the steps in our previous post.

    Please refer to Table A (ANNX-1) below, Coloums (1) to (7) are quite clear. Please understand the coloums as explained below.

* Colm (1) is the Fin year starting from the first year to which the arrears partain to , ie Fin Year 2029-20 corresponding to AR 2020-21.

* Colm (2) is directly copied from the ITR of the particular Year in our case AY 2020-21 since arrears pertained to the period Jul 19 to Feb 20. 

* Colm (3) is the splitted amount of arrears for the Fin year 2019-20 as worked out above. 

* Colm (4) is the addition of (2)+(3).

* Colm (5) is the tax again taken from the ITR of AY 2020-21.

* Colm (6) One need to work out the tax on income incl the arrears for the Ay 2020-21.

* Colm (7) is the Increase in Tax on adding the arrears ie (6)minus(5).

DO THIS FOR THE FOLLOWINGYEARS AS WELL AND ADD THE COLM(7) which indicate that had your received the arrears in the particular years you would have paid this much extra tax to what was paid by you for the entire period of the Arrears received. Suppose the total figure of Col (7) comes to be "BBB".

Now Come to the Current Ass Year 2024-25. Here again work out the tax on income with total arrears as well as without the arrears so added. Note down how much extra you will be paying this year because the arrears suppose it is "AAA".

Your tax  relief will be = AAA minus BBB which will be filled up in under Particulars in Annexure 1. The figure in the last row here under Particulars  will be your relief under Sec 89(1) which you will claim in your ITR.

 Please note that data which you would work out as above should be noted down on paper, since the same is to be used filling the FORM 10 E on line for Submission.  

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     SLABS TAKEN--   As mentioned above in the above Form for the financial years as shown  the subject assessee became senior citizen during the FY 2010-11. as such his calculations from the Fin Year 2010-11 on wards are based on  slabs prescribed  for a Senior Citizen. The calculations thus upto FY 2009-10 are as for a MALE Assessee.