I have been earning monthly salary. I have not yet filed ITR for AY 2017-18. During the Financial Year 2016-17 only 8 months salary received regularly and TDS deducted. For remaining 4 months arrear salary received during the financial year 2017-18 along with 12 months regular salary and TDS deducted. Now, my query is in which FY I have to show the arrear salary. If it shows in FY2017-18 my tax bracket goes to 30%. Further Form26S showing the TDS of arrear salary during FY2017-18. Clarify how to compute taxable income for FY2016-17 and 2017-18.
Dear Sir,
Arrears are taxable when they are actually received i.e. on receipt basis. We usually take salary income on actual basis because TDS liability on employer is on payment basis.
1) For F.Y. 2016-17, file ITR-1 showing the total salary of 8 months along with the bank interest income. Also to avoid mismatch with the Form 26AS and notices from the deptt. in future, file ITR with 8 month's salary only.
2) For F.Y. 2017-18, take total salary of 12 months along with arrears for filing ITR.
Hi
For the FY 2016-17 you will need to show the salary for 8 months. Usually, salary is taxed on receipt basis and this will ensure that your TDS matches with 26AS and there are no future scrutiny from the IT Department.
For the FY 2017-18, you will need to show the total salary of 12 months and the arrear payments.
Hope this clarifies.
Regards,
Nikhil.
Sir, In such case I have to pay additional tax because of arrears taxable income exceeds 10 lakhs. should I pay 30% tax on income above 10 lakhs. Is there any exemption provision for arrears
If you have received any portion of your salary in arrears or in advance, or you have received family pension in arrears, you can avail some tax relief under section 89(1) read along with Rule 21A.
Hi,
You will have to show that income in FY 2017-18. You can call releif u/s 89 for extra taxes applicable on arrears.
Please feel free to call/ revert in case you need more clarity.
You can claim rebate u/s 89, which basically evens out the tax liability across the years. The calculation is slightly cumbersome. Pl. use a standard software to ascertain correct tax liability.
Dear Sir,
You can claim relief u/s 89 for the difference of tax on the arrears of salary for the four months which will result into refund of excess TDS deduction.
We may assist you in calculation of the relief.
Thanks
Hi
The arrears of salary shall be taxable in the year of receipt only.
However, you can claim relief under section 89 for the increased slab rates.
