The income tax is a form of taxation levied by the central government on an individual's annual earnings, be it from salary or other means. Every individual or entity earning taxable income must pay it. To declare this income and the taxes paid, you must file an Income Tax Return (ITR) each year. The ITR reports your earnings, deductions, and the final tax liability or refund due.
But what happens if you receive part of your salary or income late? Perhaps in the next financial year? In such cases, your current year’s income may include arrears from earlier years, pushing you into a higher tax bracket. This is where Form 10E helps.
What Is Form 10E?
Section 89(1) of the Income Tax Act is relevant when you have received the arrears from previous years in this financial year. Form 10E becomes an important requirement in this case. If you find yourself receiving income from previous financial year and seek to declare it as such to claim the tax relief applicable, you may want to know more about filing Form 10E.
Simply put, it helps taxpayers spread their tax liability over the years to which the income pertains. If you receive delayed salary, bonus, commission, or other income for a previous year, you can use Form 10E to get relief and avoid higher tax on a lump sum.
Why Filing Form 10E Is Mandatory?
Filing Form 10E is not mandatory or a requirement in all cases. Whether you need to file this form depends on whether you are claiming any tax relief for arrears received under Section 89(1). If so, this form becomes a fundamental requirement.
If you do not file Form 10E, the entire arrears will be taxed in the year of receipt. Since this leads to an increase in your total annual income, you may be facing a higher tax liability for the current financial year. The relief mechanism through Form 10E ensures that your income is taxed at the applicable rates of each respective year.
Simply put, not filing Form 10E could mean paying more tax than required. The form is specifically designed to prevent unfair taxation on delayed income.
When Should You File Form 10E?
You must file Form 10E if you have received any of the following related to past financial years:
- Salary arrears
- Advance salary
- Bonus
- Commission
- Family pension
- Other similar income
Example:
If your salary for FY 2022–23 is paid in FY 2023–24 (i.e., AY 2024–25), you must file Form 10E in AY 2024–25 to claim relief.
How to File Form 10E Online?
The Income Tax Department’s e‑Filing portal enables a straightforward online submission of Form 10E. Here are the steps:
Step 2. Navigate to e-File > Income Tax Forms > File Income Tax Forms.
Step 3. Select Form 10E from the list.
Step 4. Choose the relevant assessment year.
Step 5. Enter details such as the nature of income, the financial year of arrears, and the amount received.
Step 6. Review the auto-calculated tax relief by the portal.
Step 7. Submit Form 10E.
Step 8. Then, proceed to file your ITR by the due date, ensuring Form 10E details are included.
If you have an idea of how to file ITR on the official Income Tax India portal, filing Form 10E should be relatively hassle-free.
How Form 10E Provides Tax Relief?
Form 10E is to be filed when availing benefits offered under Section 89(1). This is done by allocating the tax liability to the time period, in financial/assessment years, in which the income was actually earned and due rather than the year it was received. Here's how:
- The portal calculates what your tax liability would have been in the original year if that income had been received on time.
- It then compares this with your current year’s tax calculation.
- The difference becomes your eligible tax relief.
The older portion is taxed at that year's applicable rates, often resulting in significant savings.
Key Benefits of Filing Form 10E
If you are filing Form 10E, here are some of the benefits you may experience.
Legal compliance:
Section 89(1) mandates this relief.
Lower tax liability:
Prevents over-taxation on lump-sum arrears.
Tax fairness:
Ensures you're taxed based on the correct year’s income slabs.
Possible refund:
Reduced tax liability could mean money back.
If you’ve received salary arrears or any other past-year income, filing Form 10E is crucial. It helps you avoid being taxed twice or unfairly taxed on the same income.
Though it’s a simple online form, it plays a major legal role in protecting your finances. After submitting Form 10E, your ITR will reflect the adjusted tax calculation. You may either receive a refund or a reduction in the tax you owe will be offered. An online income tax calculator be help you get a broad idea of how the numbers may play out. Alternatively, you may consult your tax or financial expert.
If you seek to claim any relief under Section 89, filing Form 10E is a common and basic requirement. Filing it ensures your tax burden is fair, accurate, and in accordance with the law.
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