When you receive arrears — back-pay or pension for earlier years — as a lump sum, it can push you into a higher slab in the year of receipt. Section 157 relief (the old Section 89) corrects this by re-computing tax as if the arrears had been taxed in the years they actually relate to. You claim it by filing Form 39 — the old Form 10E — online before you file your ITR; miss that order and the relief is disallowed. It covers salary arrears/advance, family-pension arrears, gratuity, commuted pension and leave encashment.
Arrears are money you earned in earlier years but received all at once now — a pay-commission revision, a delayed increment, or pension dues released together. The problem is that our tax is progressive: bunching several years' income into one year can throw you into a higher slab and make you pay more tax than you would have if each year had been taxed on time. Section 157 relief (the old Section 89) exists precisely to undo that unfairness, and Form 39 — the old Form 10E — is the online form that computes and claims it. The single most important rule to remember is order: Form 39 must be filed before you submit the ITR, otherwise the department disallows the relief and issues a demand.
Section 157 does not exempt your arrears — you still pay tax on them — but it ensures you don't pay extra tax merely because of the timing of receipt. The mechanism is a two-way comparison. First, the tax is worked out on your total income including the arrears in the year of receipt. Second, the arrears are spread back to the years they relate to and the additional tax those years would have borne is calculated. The difference between the two — the extra tax caused purely by bunching — is your relief, and it is deducted from your current year's tax. If spreading the arrears back produces no extra tax (because those years were also low-income), the relief can wipe out almost the entire additional burden.
The relief is available on several kinds of lump-sum receipts, not just salary. It covers salary received in arrears or in advance, family pension arrears, gratuity for past service, commuted pension, compensation on termination, and leave encashment in certain cases. So a retired person who receives several years of pension dues together, or an employee who gets a large pay-revision arrear, can both use it. A family member receiving family-pension arrears — taxed under income from other sources — is equally entitled, which is a point often missed by first-time filers dealing with a deceased pensioner's dues.
Form 39, which taxpayers still know by its old name Form 10E, is the statutory form in which you set out the arrears and their allocation to earlier years, and it must be filed online on the e-filing portal. Crucially, it has to be submitted before you file the return for the year — the ITR schedule where you enter the Section 157 relief amount will only be honoured if a Form 39 is already on record. Every year a large number of taxpayers claim the relief in the ITR but forget the form, and the department disallows the relief and raises a demand for the difference. So treat Form 39 as step one and the ITR as step two.
Suppose in the current year you receive ₹3 lakh of salary arrears relating to three earlier years, ₹1 lakh for each. Taxed entirely this year, the ₹3 lakh sits on top of your current salary and may be taxed at 20% or 30%, costing you, say, ₹60,000–₹90,000 extra. But when you spread ₹1 lakh back to each of the three earlier years — in which your income was lower — the additional tax those years would have borne might be only ₹10,000–₹15,000 in total, because that ₹1 lakh fell in a lower slab each time. The relief is the gap — roughly ₹45,000–₹75,000 in this illustration — and it comes straight off your current tax. The exact figures depend on each year's income, which is why Form 39 asks for them.
The most damaging mistake is claiming Section 157 relief in the ITR without filing Form 39 first — the relief is then reversed. Another is not keeping the earlier-year income figures, which the form needs; dig out those old returns or salary certificates before you start. People also wrongly assume the relief is only for government employees — it is available to anyone receiving qualifying arrears, private-sector or pensioner alike. Note too that Section 157 relief has generally not been allowed against certain receipts and is claimed under the regime you file in; if the arrears are large or span many years, it is worth having a professional prepare the form so the allocation is correct and the relief is maximised. Reconcile the arrears with your Form 26AS and your salary certificate (Form 130, the old Form 16), since the employer usually reports the arrears and any TDS there.
If your arrears are modest and your income sits in the same slab across years, the relief may be small and the exercise optional. But whenever a lump sum pushes you from a lower slab into a higher one — the classic pay-commission or pension-dues situation — Section 157 relief can save a substantial amount, sometimes tens of thousands of rupees, for a few minutes of form-filling. Because the saving is real money and the process is entirely online, it is almost always worth filing Form 39 when you receive arrears. And since the form must precede the return, plan for it the moment the arrears hit your account rather than at the last minute before the filing deadline. Keep a copy of the filed Form 39 and the year-wise workings with your records, because if the return is ever picked up for a check, the relief you claimed is only as good as the allocation you can substantiate — and a clean, documented form settles the query at once.
It is relief that prevents salary or pension arrears received as a lump sum from pushing you into a higher slab. Tax is re-computed as if the arrears had been taxed in the years they relate to, and the extra tax caused by bunching is given back as relief. It was Section 89 under the old Act.
Yes, and you must file Form 39 — the old Form 10E — online on the e-filing portal before you file your ITR. If you claim the relief in the return without the form on record, the department disallows it and raises a demand.
Yes. Family-pension arrears, though taxed under income from other sources, qualify for Section 157 relief, and Form 39 is filed the same way with the arrears allocated to the earlier years.
Log in to the e-filing portal, go to e-File → Income Tax Forms, select Form 39 (old Form 10E), choose the year of receipt, fill the arrears broken down by year with each year's income, submit and e-verify, then file your ITR entering the computed relief.
We prepare Form 39 (the old Form 10E), compute your Section 157 relief correctly and file it before your return so the relief holds.
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