I am a bank employee. I hope to get arrears of ₹1 lakh this October. But my bank paid ₹60,000 as ad hoc payment of the expected arrears in October 2019. Can I get relief on arrears for FY2019-20 as well as 2020-21?

Ajitha

Relief under Section 89 of the Income Tax Act can be claimed for salary received in arrears.

Further, relief would be available if salary is paid in arrears, due to which the total income is assessed at a rate higher than that at which it would otherwise have been assessed.

Based on receipt of the arrears, a relief can be claimed by furnishing Form 10E online before filing the income tax return.

Applying the above provisions in your case, since arrears of salary amounting to ₹60,000 was received during FY2019-20, relief can be claimed in FY2019-20. Once the balance arrears is received, you may claim further relief in that FY.

I am in the 30 per cent tax bracket. The interest earned on the balance maintained in my savings account was also charged at the same rate. In order to reduce my tax liability, I had transferred my savings account balance to my wife, who has no taxable income of her own. In such circumstance, I wish to understand the tax liability for self and my spouse.

G Ravindra Kumar

As per Section 64(1)(iv) of the I-T Act, the income earned by an individual’s spouse from the assets transferred by the individual shall be clubbed in the hands of the individual.

Accordingly, the interest income earned from funds transferred to your wife’s saving account shall be clubbed with your income and taxed at applicable slab rates in your hands.

Interest earned from a savings bank account is exempt up to ₹10,000 under Section 80TTA of the I-T Act. Interest earned exceeding ₹10,000 is taxable under the head ‘Income from other sources’, at applicable slab rates.

The writer is a Partner, Deloitte India. Send your queries to taxtalk@thehindu.co.in

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