Tax Talk

I am a salaried individual. This year, I have received an arrear amount of Rs 1,34,500, owing to which part of my income has come under the tax bracket of 30 per cent instead of 20 per cent. This arrear was generated on account of fixation of my salary from 2006. Is there a way in which I can avoid the additional tax?

–Rakesh Kaushal

 According to section 89 of the Income Tax Act, 1961, where an assessee is in receipt of arrears under the head ‘salary’, due to which his total income is assessed at a higher rate, then under such a situation the assessee may apply for relief while filing his return.

Relief prescribed in such a situation is the difference of incremental tax arising on such arrears in the year of receipt and the year to which such arrears belong. Accordingly, in your case you may claim such relief while filing your tax return for the current financial year.

  Is there any tax relief under the Income Tax Act for the lump-sum amount paid for a mutual consent divorce settlement? – Krishna Jayaraman

 According to the provisions of the Income Tax Act, 1961, there is no specific deduction/ exemption/ relief in relation to payment of alimony at the time of divorce. Based on judicial precedents, such payment is an application of income and is not a case of diversion of income by overriding title. Accordingly, exemption/ deduction cannot be claimed in relation to such alimony payment, even if the employer directly withholds such payments from the payroll of the employee. It is to be paid from the income, net of tax.

Mail your queries to taxtalk@thehindu.co.in

(The author is a practising chartered accountant)

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