EaseValueSalary arrears are taxed in the year you receive them, not the years you earned them. A pay revision settled after three years, a promotion backdated, an increment released late, a court or tribunal award — each arrives as a single lump sum that lands on top of a full year's salary. Because tax rates rise in steps, that bunching pushes the recipient into a higher band and taxes money at a rate it would never have borne had it been paid on time. Nothing about the amount changed; only the timing did. Section 157 of the Income-tax Act, 2025 — the provision carrying forward the old Section 89 — exists to correct exactly this. It computes the tax the lump sum actually caused in the year of receipt, compares it against what the same money would have cost spread across the years it relates to, and gives you the difference back as relief. This calculator does that computation year by year, up to five earlier years, and reports the saving in rupees. It also enforces the rule that quietly destroys more of these claims than any other: the relief is available only if Form 39 (old Form 10E) is furnished on the e-filing portal before the return is filed. Not with the return. Not afterwards. A return claiming the relief without the form already on record is processed with the relief disallowed, and the taxpayer receives a demand for the amount they thought they had saved, months later, with interest running. The form takes about fifteen minutes and costs nothing, which on a five-figure claim makes it very likely the best-paid quarter-hour of your year.
How it’s calculated
- Enter your total income for the year of receipt, including the arrears. This is the inflated figure — salary, the lump sum, and everything else, after the standard deduction under Section 19 and any other deductions you are claiming. The calculator works out the without-arrears figure for itself, so do not subtract them.
- Enter the total arrears included in that figure, gross. If your employer paid the arrears net of tax deducted at source, use the gross amount, not what was credited to your bank account — the relief is computed on the gross.
- Set how many earlier years the arrears relate to, between one and five. A pay commission settlement typically spreads across three or four; a single delayed increment may relate to one. This is an input rather than an assumption because it changes the answer substantially, and because the correct number is a question of fact about your own settlement.
- For each earlier year, enter the total income you actually declared in that year's return. Take it from the return as filed, not from memory and not from your salary slip — total income after deductions is what the computation uses, and an income overstated even modestly in an earlier year can extinguish relief that genuinely exists.
- For each earlier year, enter the slice of the lump sum that belongs to it. The allocation is not a matter of choice: it must follow the period the money relates to, and your employer's year-wise arrears statement is the evidence for it.
- Check that your allocations add up to the total arrears. The calculator flags any mismatch in red, and the direction of the error matters — leaving arrears unallocated overstates your relief, while over-allocating understates it. Neither error cancels out and neither survives examination of the form.
- Choose the regime for the year of receipt. The new regime is the default for FY 2025-26 unless you have opted out. Because the two regimes tax the same income very differently, the size of the relief depends on this choice.
- Choose the rate basis for the earlier years — whichever regime you were actually taxed under then, which for most people is the old regime. Note the honest limitation stated on the widget: one rate set is applied to all the earlier years, so the figure is exact for years taxed on the old-regime structure in force from FY 2019-20 onward, and indicative for years before that or where you switched regimes part-way.
- Read the first two rows: tax with the arrears and tax without them. The difference between them is the entire cost the lump sum imposed on you this year, and it is the number the relief is measured against.
- Read what it would have cost, spread over the right years. That is the same money taxed in the years it was earned. Where your earlier years were leaner, this figure is markedly lower, and the gap is your relief.
- Read the relief figure. This is what filing Form 39 is worth to you in rupees, and it is the number to weigh against the fifteen minutes the form takes. If it reads nil, the box beneath explains why — usually because your earlier years were already taxed at the same rate or higher, so there was no bunching effect to protect against.
- Read the effective rate on the arrears and the top slab rate rows together. They show, in one line, exactly how much of the problem is bunching: the rate the arrears actually bore this year against the rate the same money would have borne spread properly.
- Read the per-year breakdown beneath. It shows the extra tax each earlier year would have borne and the top rate that year would have reached. This is the working you will need if the claim is ever queried, and it is the same allocation that goes on Form 39.
- Read the coloured boxes last, and in order. The first states the Form 39 rule and prices your claim. The second checks your allocation arithmetic and explains why spreading works at all. The third covers the surcharge threshold where the arrears have pushed you across ₹50 lakh, and sets out the four practical steps in the order they have to happen.
Why a lump sum costs more than the same money paid on time
Income tax is charged at rates that rise in steps. That structure is fair enough when income arrives evenly, and it produces a distinctly unfair result when several years' income arrives at once. The arrears themselves are unchanged — the same rupees, for the same work — but because they land on top of a year in which you have already drawn a full salary, they are taxed in the bands above that salary rather than in the bands they would have occupied had they been paid when earned.
The effect is easy to see on a worked example. Take a total income of ₹18,00,000 for the year of receipt, of which ₹6,00,000 is arrears relating to three earlier years in which income was ₹6,00,000 a year. Without the arrears, total income for the receipt year would have been ₹12,00,000 and the tax under the new regime would have been nil, because the rebate under Section 156 covers it. With the arrears, tax is ₹1,66,400. The whole of that is attributable to the lump sum, and it works out at an effective rate of 27.73% on money that, spread properly, would never have seen anything like that rate.
Now spread it. Each of the three earlier years had ₹6,00,000 of income; adding ₹2,00,000 of arrears to each takes them to ₹8,00,000, on which the additional tax under the old-regime structure is ₹41,600 a year, or ₹1,24,800 in total. That is what the money would have cost had it been paid on time — an effective rate of 20.80%. The difference between the two figures, ₹41,600, is pure timing cost. It is not a charge on income; it is a charge on the government's own delay in paying you, or your employer's.
Two things follow from this that determine whether relief is worth pursuing at all. Relief is largest where the earlier years were lean and the receipt year is fat — someone whose income has grown steeply, or who was in a lower-paid role during the arrears period, has the most to gain. And it shrinks toward nothing where income has been level: if the earlier years were already taxed at the same rate as this year, there was no bunching effect and there is nothing for the relief to correct. The calculator shows both cases honestly rather than always producing a number.
It is worth being precise about what relief does not do, because the misunderstanding is common. It does not move the income into the earlier years. The arrears remain taxable in the year of receipt, those earlier assessments are not reopened, no revised returns are required for them, and nothing you filed before is disturbed. Section 157 adjusts the tax, not the year.
How the relief is actually computed
The mechanism is a four-step comparison, and understanding it is what lets you sanity-check the output rather than trust it blindly.
First, compute the tax on your total income for the year of receipt including the arrears. Second, compute the tax on the same total income excluding the arrears. The difference between those two figures is the extra tax the lump sum caused this year — call it the receipt-year excess.
Third, for each earlier year the arrears relate to, compute the tax on the total income you actually declared in that year, then compute it again with that year's slice of arrears added. The difference is what that slice would have cost had it been paid on time. Add those differences across all the years. Fourth, relief is the receipt-year excess less the sum of the earlier-year excesses, where that comes to a positive figure. Where the earlier-year total is the same or higher, no relief arises.
The number of earlier years is a genuine variable and it moves the answer materially, which is why this calculator makes it an input rather than fixing it. On the ₹18,00,000 example above with ₹6,00,000 of arrears, spreading across three years at ₹2,00,000 each produces relief of ₹41,600. Attributing the whole ₹6,00,000 to a single earlier year produces relief of only ₹20,800 — because the whole lump lands in one year, that year is itself pushed into a higher band, and much of the benefit is lost. Spreading it across five years produces ₹28,600 on the slightly different income profile modelled above. The pattern is consistent: the wider the genuine spread, the larger the relief.
That said, the number of years is a question of fact and not a lever to be pulled. The arrears must be attributed to the periods they actually relate to, and your employer's year-wise arrears statement is the evidence. The reason to think carefully about it is not to maximise the claim but to avoid understating it: arrears are frequently spread more widely than people assume, and a settlement casually described as covering two years often turns out to cover four once the effective dates are read properly.
The calculator reports the extra tax for each earlier year separately, together with the top rate that year would have reached. That per-year table is not decoration — it is the working behind the claim, it is the same allocation that goes on Form 39, and it is what you will want in front of you if the claim is ever queried.
Form 39: the rule that forfeits the whole claim
Relief under Section 157 is not automatic and it is not claimed simply by entering a figure in the return. It is available only where Form 39 is furnished — the form carrying forward the old Form 10E — on the e-filing portal, before the return for the year of receipt is filed.
The sequencing is the part that catches people, and it is unforgiving. Not with the return. Not shortly after it. Before it. A return that claims the relief without the form already on record is processed with the relief disallowed, and the taxpayer receives an intimation raising a demand for the exact amount they believed they had saved — typically some months later, with interest having accrued in the meantime. The claim is not merely delayed; on that return it is gone, and recovering it means a rectification or a revised return, which is work and time for something that would have cost fifteen minutes done in the right order.
It is worth appreciating the economics of this. On the worked example above the relief is ₹41,600; on a larger case — ₹55,00,000 of total income including ₹12,00,000 of arrears, spread across three years of ₹14,00,000 income — the calculator puts it at ₹1,27,920. Fifteen minutes of form-filling against six figures of tax is an hourly rate very few people will beat this year. And the failure mode is not a reduced claim or a queried claim. It is a claim that produces nothing at all, in circumstances where the taxpayer was fully entitled to it and simply did the two steps in the wrong sequence.
The form itself is straightforward. It requires the year of receipt, the total arrears, and the year-wise breakdown of the arrears against the income declared in each of those years — which is precisely what the calculator above produces. Furnish it, keep the acknowledgement, and only then file the return claiming the relief.
One further practical route is worth knowing and is chronically under-used. Your employer can give effect to the relief while deducting tax from your salary, if you provide the necessary particulars during the year. Where that is done, the tax withheld from the arrears is correct in the first place and no refund position arises at all. That is worth asking for the moment you know arrears are coming, rather than paying tax you are not liable for and waiting a year to get it back. Not every payroll department will do it, but many will, and nobody offers it unprompted.
Getting the inputs right, because that is where claims actually fail
The computation itself is arithmetic. The claims that fail, fail on inputs, and there are three that account for almost all of it.
The first is using the wrong income figure for the earlier years. The computation runs on total income as declared in each year's return — after deductions — not on gross salary, not on CTC, and not on what you remember earning. Taking the figure from a payslip rather than from the return will usually overstate the earlier-year income, which overstates the tax those years would have borne, which understates your relief. It is an error that quietly gives away part of a claim you are entitled to, and it is entirely invisible unless you go back to the returns as filed.
The second is an allocation that does not add up, and the direction of the error matters more than people expect. Leaving part of the arrears unallocated understates the tax the earlier years would have borne, which overstates your relief — producing a figure larger than a correct allocation would, and one that will not survive any examination of the form. Over-allocating does the reverse and understates it. The calculator flags a mismatch in red, states which way the error runs, and warns you against relying on the relief figure until it is fixed. On a case with ₹6,00,000 of arrears where only ₹3,00,000 is allocated, the relief shown jumps from a correct ₹41,600 to ₹1,04,000 — a two-and-a-half-fold overstatement produced by nothing more than an incomplete table.
The third is arrears larger than total income, which cannot be right and usually signals that the total-income field has been filled with income excluding the arrears. This calculator wants the inflated figure and derives the other one itself. The tool detects the inconsistency and says so rather than silently computing on a clamped number, but it is worth understanding the input convention before you start.
A fourth issue is subtler and worth flagging honestly. The calculator applies one rate basis to all the earlier years. That produces an exact result where those years were taxed on the old-regime structure in force from FY 2019-20 onward, which covers the great majority of real cases. It is indicative rather than exact for years before that, where the rebate threshold and certain band rates differed, and for anyone who switched regimes part-way through the arrears period. Where the claim is large or the arrears reach back a long way, that is a case to have computed against each year's own rates rather than taken from any calculator, including this one.
Finally, note that an earlier year for which you never filed a return — because your income was below the filing threshold — still counts for the spread. The absence of a return does not disqualify the year. You will need to be able to substantiate the income figure for it, but the year itself is available, and these are frequently the leanest years and therefore the ones that generate the most relief.
Surcharge, and what happens when arrears push you past ₹50 lakh
For higher earners the slab structure is not the only thing that steps. Surcharge is added to the tax once total income crosses ₹50 lakh, and it rises again at ₹1 crore and ₹2 crore. Crucially, surcharge applies to the whole of your tax, not merely to the tax on the excess — so crossing the threshold is a step rather than a slope, and a lump sum that carries you over it costs disproportionately more than the same money received a year earlier or later.
Because salary is ordinary income, the full surcharge ladder applies to arrears. The 15% cap that limits surcharge on capital gains and dividends is of no help here; that cap is drafted by reference to those particular charges and has no application to salary. This is worth stating explicitly because it is a common and expensive assumption in the other direction.
The calculator implements marginal relief, which prevents the extra tax from exceeding the extra income just past each threshold, and it flags the crossing in a dedicated box when the arrears are what caused it. On a worked case — ₹55,00,000 of total income including ₹12,00,000 of arrears, against ₹43,00,000 without them — the receipt year bears ₹14,07,120 of tax against ₹9,04,800 without the lump sum, so the arrears cost ₹5,02,320, an effective rate of 41.86%. Spread across three earlier years of ₹14,00,000 each, the same money would have cost ₹3,74,400, or 31.20%. Relief of ₹1,27,920 follows, and a substantial part of it is the surcharge the crossing triggered.
At the top end the numbers become considerable. On ₹3,00,00,000 of total income including ₹1,20,00,000 of arrears relating to four years of ₹50,00,000 income each, tax in the receipt year is ₹1,11,54,000. The arrears account for ₹51,97,920 of that, at an effective 43.32%. Spread over the four earlier years the same money would have borne ₹46,64,400, at 38.87%. Relief comes to ₹5,33,520 — for the same fifteen minutes of form-filling.
One planning point follows for anyone expecting a further tranche. If more arrears are due and the payment date is genuinely negotiable with your employer, the year the money lands in is worth a conversation before it is paid rather than after. Splitting a payment across two financial years, where the entitlement genuinely permits it, can keep a taxpayer below a surcharge threshold in both — and that is a decision that has to be made in advance, because once the money is received the year of receipt is fixed and only Section 157 relief remains available.
Who this affects most, and where the claim is routinely missed
Arrears are far more common than the phrase suggests, and the people they reach most often are the least likely to be advised about the relief. Government and public-sector employees whose pay is revised by a commission receive arrears as a matter of routine, frequently covering three or four years and frequently at a point in a career when income has already risen — which is exactly the profile that generates the largest relief. Defence, police and railway staff are in the same position. So are teachers and university employees whose pay scales are revised centrally and implemented locally with a lag measured in years.
The second large group is anyone whose entitlement was established by a court or tribunal. A wrongful-termination award, a reinstatement with back pay, a settled promotion dispute, an arbitration award on employment terms — all of these arrive as a lump sum covering a period during which the recipient was, very often, earning little or nothing. That is the ideal fact pattern for Section 157: lean earlier years, a fat receipt year, and a large gap between the two. It is also the pattern in which relief is most frequently missed, because the recipient is preoccupied with the litigation and nobody involved in it is thinking about the tax year the money lands in.
A third group is smaller but worth naming: employees of companies that defer increments through a difficult period and release them later. This became common enough after periods of business stress that a great many private-sector employees have a Section 157 claim they have never heard of. The employer processes the release as ordinary salary, deducts tax at the receipt-year rate, and the matter is closed as far as payroll is concerned.
That last point generalises, and it is the mechanical reason so many claims go unmade. Tax is deducted at source on arrears at the receipt-year rate, on the full lump sum, with no regard to which years the money relates to. Your Form 16 will show the arrears as salary of the receipt year and the tax withheld accordingly, because that is exactly what the deduction provisions require. Nothing in that document hints that a relief exists. Unless you or your advisor raise it, the over-withholding simply becomes your final liability, and the difference between the tax you paid and the tax you owed is never noticed by anyone.
There is one more thing worth checking on any arrears receipt, particularly a court-awarded one: whether an interest component has been included. Interest on delayed payment is not salary arrears and is not relieved under Section 157 — it is taxed on a different basis and, depending on its character, may be assessable in a different manner altogether. Where a settlement statement shows a single figure covering both principal arrears and interest, get it broken down before computing anything. Treating the whole amount as arrears will overstate the claim, and treating the whole amount as interest will forfeit it.
What else Section 157 covers, and what this calculator does not
Relief under Section 157 is not confined to ordinary salary arrears, though that is much the most common case and the only one this calculator models. It extends to advance salary received in a lump sum, to family pension arrears, and — on a materially different computation, with its own conditions — to gratuity, commuted pension and compensation on termination of employment. Those variants are not interchangeable with the arrears computation above, and the answer this page produces is not their answer. If your lump sum is one of them rather than plain salary arrears, take it to an advisor rather than a calculator.
There is one important interaction worth flagging for anyone receiving retirement payouts. Relief in respect of gratuity under Section 157 is subject to its own restrictions, including limits on how often it may be claimed, and it interacts with the gratuity exemption itself. A retiring employee receiving both salary arrears and a gratuity in the same year has two quite separate computations to run, and running them together in one calculator would produce a figure that is wrong in both directions.
The figures on this page are computed for a resident individual below 60. New-regime rates are nil to ₹4 lakh, then 5%, 10%, 15%, 20%, 25% and 30% in ₹4 lakh steps, with the rebate under Section 156 and its marginal relief. Old-regime rates are nil to ₹2.5 lakh, 5% to ₹5 lakh, 20% to ₹10 lakh and 30% above, with the rebate where total income is within ₹5 lakh. Cess is 4% throughout. Senior and very senior citizens have different exemption limits under the old regime that are not modelled, which matters particularly for family pension arrears.
On section numbering, two provisions are cited here with confidence because both have been verified against the Income-tax Act, 2025: Section 157 for the relief itself, carrying forward the old Section 89, and Form 39, carrying forward the old Form 10E. Also cited where relevant are the salary provisions at Sections 15 to 19, the standard deduction under Section 19, the rebate under Section 156, and interest under Sections 424 and 425. Where a provision has not been verified it is described in words rather than given a number, which on a firm's own public tool is the only defensible approach.
The tool does not compute interest under Sections 424 and 425, though it is worth knowing that a large arrears receipt can create an advance-tax shortfall of its own. Where arrears arrive late in the year and tax was not withheld in full, the resulting balance can attract interest even though the underlying liability is reduced by the relief — so the relief and the interest position are worth looking at together rather than separately.
Treat the output as a well-informed estimate to take into a conversation with your advisor, and as a prompt to do the one thing that matters most: furnish Form 39 before you file. Every other error on this page is correctable. That one is not.
Frequently asked questions
What is relief under Section 157, and is it the same as Section 89?
It is the same relief. Section 157 of the Income-tax Act, 2025 carries forward what was Section 89 of the 1961 Act. Arrears are taxed in the year you receive them, so a lump sum covering several years lands on top of a full year's salary and is taxed in higher bands than it would ever have reached had it been paid on time. Section 157 computes the tax the lump sum actually caused this year, compares it with what the same money would have cost spread across the years it relates to, and gives you the difference back. It adjusts the tax, not the year — the arrears stay taxable in the year of receipt and no earlier assessment is reopened.
What happens if I do not file Form 39?
You lose the entire relief. Form 39 (the old Form 10E) must be furnished on the e-filing portal before you file the return for the year of receipt — not with it, not afterwards. A return claiming the relief without the form on record is processed with the relief disallowed, and you receive a demand for the amount you thought you had saved, usually months later with interest running on it. The form takes about fifteen minutes and costs nothing. On a claim worth ₹1,27,920 — a realistic figure for a ₹12,00,000 arrears receipt — that is the best-paid quarter of an hour available to you this year.
How much is the relief usually worth?
It depends entirely on the gap between your earlier years and your receipt year. On ₹18,00,000 of total income including ₹6,00,000 of arrears relating to three years of ₹6,00,000 each, the arrears cost ₹1,66,400 this year at an effective 27.73%; spread properly they would have cost ₹1,24,800 at 20.80%, so relief is ₹41,600. On ₹55,00,000 including ₹12,00,000 of arrears it is ₹1,27,920. On ₹3,00,00,000 including ₹1,20,00,000 of arrears over four years it is ₹5,33,520. Relief is largest where the earlier years were lean and the receipt year is fat.
Why does my calculator show no relief at all?
Almost always because there was no bunching effect to correct. If your earlier years already had enough income to be taxed at the same rate as this year, or higher, the arrears would have cost the same or more spread out — so there is nothing to relieve. Relief is protection against several years' income arriving at once, not a discount for receiving arrears. Before concluding there is nothing there, check two things: the earlier-year incomes against your returns as filed rather than from memory, and the number of years, since settlements are frequently spread more widely than people assume.
How many earlier years can I spread the arrears over?
As many as the arrears genuinely relate to — this calculator handles up to five, which covers the overwhelming majority of cases. The number matters a great deal: on ₹6,00,000 of arrears, spreading across three years produces ₹41,600 of relief while attributing the whole amount to a single year produces only ₹20,800, because the lump then bunches in that year instead. But the allocation is a question of fact, not a lever. It must follow the periods the money relates to, and your employer's year-wise arrears statement is the evidence for it.
What income figure do I use for the earlier years?
Total income as declared in that year's return — after deductions — not gross salary and not CTC. This is the most common input error and it runs against you: taking the figure from a payslip overstates the earlier-year income, which overstates the tax that year would have borne, which understates your relief. Go back to the returns as filed. If an earlier year had income below the filing threshold and you never filed a return for it, that year still counts for the spread — the absence of a return does not disqualify it, though you should be able to substantiate the figure.
My arrears pushed me over ₹50 lakh. Does that make it worse?
Considerably. Surcharge applies once total income crosses ₹50 lakh and it applies to the whole of your tax, not just the tax on the excess — so crossing the line is a step, not a slope. Salary is ordinary income, so the full surcharge ladder applies; the 15% cap that limits surcharge on capital gains and dividends does not help here. Marginal relief softens the crossing and is applied in the figures, but the event remains expensive. It is also exactly the distortion Section 157 exists to correct, which is why relief tends to be large in these cases. If a further tranche is coming and the payment date is negotiable, the year it lands in is worth discussing before it is paid.
Can my employer apply the relief instead of me claiming a refund?
Yes, and it is badly under-used. Your employer can give effect to Section 157 relief while deducting tax from your salary if you provide the year-wise particulars during the year — which means the tax withheld on the arrears is correct in the first place and no refund position arises at all. Ask for it the moment you know arrears are coming, rather than paying tax you are not liable for and waiting a year to recover it. Not every payroll department will do it, but many will, and none offer it unprompted. If they decline, furnish Form 39 yourself before filing and claim the relief in the return.
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