Quick Summary
Tax Relief provides respite from higher tax incidence in specific situations such as receipt of salary arrears, family pension, or income taxed in multiple countries.
Tax Relief refers to provisions in the Income Tax Act that reduce the tax burden on taxpayers in specific situations where income might be subject to higher tax rates or double taxation. The main relief provisions are under Sections 89, 90, 90A, and 91.
Types of Tax Relief
1. Relief under Section 89(1) - Arrears of Salary
When salary arrears are received, they may push you into a higher tax bracket for the current year. Section 89(1) provides relief by recalculating tax as if the arrears were received in the respective years.
- Applicable for salary arrears, gratuity, compensation on termination
- Form 10E must be filed online before claiming relief in ITR
- Relief = Tax payable on total income including arrears - Tax payable on total income excluding arrears
2. Relief under Section 90/90A - Double Taxation Avoidance
When income is taxed in India and a foreign country, relief can be claimed under:
- Section 90: Bilateral relief under DTAA with specific countries
- Section 90A: Relief under agreements with specified territories
- Tax Credit Method or Exemption Method as per the treaty
3. Relief under Section 91 - Unilateral Relief
When income is taxed in a foreign country with which India has no DTAA, unilateral relief under Section 91 can be claimed:
- Available only for countries without DTAA
- Relief is lower of: Indian tax on doubly taxed income or Foreign tax paid
Tax Relief vs Tax Rebate vs Tax Deduction
| Aspect | Tax Relief | Tax Rebate | Tax Deduction |
|---|---|---|---|
| When applicable | Specific situations | Low income earners | Investments/expenses |
| Benefit | Reduces tax burden | Direct tax reduction | Reduces taxable income |
Key Points
- Section 89(1): Relief for salary arrears
- Section 90: Relief under DTAA with foreign countries
- Section 91: Unilateral relief when no DTAA exists
- Form 10E mandatory for Section 89 relief
- Prevents higher tax due to arrears or double taxation
- Different from rebate and deduction