Section 89 relief on salary and DA arrears

Updated 11 October 2026

When you receive salary or pension arrears for earlier years in one lump sum, they are taxed in the year you receive them, which can push you into a higher slab or past the ₹12 lakh rebate limit. Relief under section 89 (section 157 of the Income-tax Act, 2025 from tax year 2026-27) gives back the extra tax caused by the late payment. To claim it you must file Form 10E online, which the Income-tax Rules, 2026 renumber as Form 39.

When the relief applies

The relief is for receipts that belong to earlier years, or that come in one go, including:

• Salary arrears, such as DA arrears when DA is announced months after its effective date, pay fixation arrears after a promotion or MACP, and arrears from a pay commission.
• Pension and family pension arrears, including Dearness Relief arrears.
• Advance salary.
• For non-government employees, the taxable part of gratuity and commuted pension, and compensation on termination.

Central government staff see this every year: the DA from 1 January is usually approved in March or April, so the arrears for January to March are paid in the next financial year. For example, the 60% DA from 1 January 2026 was approved in April 2026, so arrears for January to March 2026, which belong to 2025-26, were paid in tax year 2026-27. The 8th Pay Commission could create much larger arrears covering many months, depending on the date the government fixes for its recommendations. Use the DA arrears calculator to estimate yours.

How the relief is calculated

1. Work out tax for the year of receipt with the arrears and without them. The difference is the extra tax this year.
2. For each earlier year the arrears relate to, work out tax on that year's income with its share of arrears added and without. Add up these differences. Use the rates and regime that applied in each of those years.
3. Relief = (extra tax this year) minus (total extra tax in earlier years). If the result is zero or negative, there is no relief.

In plain words: you pay only the tax you would have paid if the money had come on time.

Worked example

The relief is smaller when your income is similar in every year, because the arrears would have been taxed at the same rate anyway. It is largest when the arrears push you across a slab or past the rebate limit.

Filing Form 10E (Form 39)

• Online only, on the e-filing portal, verified with Aadhaar OTP or another electronic method. A valid PAN is needed.
• File it before you claim the relief in your return. There is no fixed deadline in the law, but the department's FAQs suggest filing well before the return. If you claim relief in the ITR without filing the form, the relief is likely to be denied in processing.
• You need the year-wise break-up of the arrears (your office or pension disbursing bank can give it) and your income for those earlier years, which your old returns or Form 16 show.
• Once submitted, the form cannot be edited, so check the figures first.
• Arrears received in 2025-26 and claimed in the return filed in 2026 use Form 10E under the old rules; arrears received from 1 April 2026 use the new form, reported by the department as Form 39.

Getting relief through your employer

Government employees and employees of companies and similar bodies can give the particulars to their employer, who then allows the relief while deducting TDS. The relief then shows in Form 16. You still need to file the form on the portal yourself.

Tips

• Ask your DDO or pay office for an arrears statement showing which month each rupee belongs to.
• If arrears span several years, each year is computed separately in the form.
• The relief works in both regimes. If you were in the old regime in the earlier year, use that year's old-regime tax.
• Pensioners getting DR arrears or revision arrears can claim it too; see tax on pension.

Read the department's notes on Form 39 on the Income Tax Department website.