Relief under section 157(1), when salary is paid in arrears or in advance, gratuity, etc

When it applies (sub-rule 1). The total income of the relevant tax year is assessed at a higher rate than it otherwise would be because of receipts in that year of the kinds in the Table. The relief is as follows.

• Salary or family pension received in arrears or in advance. Relief = A − B, if A exceeds B. A is the tax on the additional salary or pension in the relevant year (tax on total income less tax on total income reduced by the additional amount). B is the total, over the tax years the amount relates to, of the extra tax each portion would have attracted in its own year. The computation runs in four steps: identify the tax years to which the additional amount relates and the portion for each; compute A; compute for each such year the tax on its total income as increased by its portion, less the tax payable on its actual total income; and add those amounts to get B.
• Gratuity for past services of five years or more but less than fifteen. Relief = gratuity × (R1 − RAvg), if R1 exceeds RAvg, where R1 is the average rate of tax on total income including the gratuity in the relevant year, and RAvg is the average of the average rates for the two preceding years, each computed with one-half of the gratuity added to that year's income.
• Gratuity for past services of fifteen years or more. The same, but RAvg is the average over the three preceding years, each computed with one-third of the gratuity added.
• Compensation on termination of employment after continuous service of not less than three years, where the unexpired term of employment is also not less than three years. Relief = compensation × (R1 − RAvg), with RAvg over the three preceding years, each with one-third of the compensation added.
• Commutation of pension. Relief = amount commuted × (R1 − RAvg), with RAvg over the three preceding years, each with one-third of the commuted amount added.

Other receipts (sub-rule 2). For any other receipts, the Board may allow such relief as it deems fit, having regard to the circumstances.

Claiming relief (sub-rules 3 and 4). The assessee furnishes the particulars in Form No. 39 on or before the due date under section 263(1)(c). A Government servant, or an employee of a company, co-operative society, local authority, university, institution, association or body, entitled to the relief may instead furnish Form No. 39 to the person responsible for making the payment under section 392(1).