Section 157 — Salary Arrears Relief | ITA 2025

Section 157 — - RELIEF WHEN SALARY ETC. IS PAID IN ARREARS OR IN ADVANCE

Section 157 is the substantive equivalent of 1961 s. 89 -- the salary-arrears / advance-salary / multi-year-salary relief mechanism. The provision addresses the cliff-edge problem when an employee receives in one tax year (a) arrears of salary; (b) advance salary; (c) salary for >12 months; (d) profits in lieu of salary; or (e) family-pension arrears. Without relief, the lump-sum receipt would trigger higher slab and excessive tax. Section 157 allows the AO to grant prescribed relief (Form 10E) on application by assessee. Anti-double-relief: NO relief on income for which deduction has been claimed under s. 19(1) Table Sl. No. 12 (the salary-deduction provision). The Form 10E mandatory-pre-filing rule (CBDT Notification 2014) is preserved.

Statutory text — Income-tax Act, 2025

Marginal note -- Relief when salary, etc., is paid in arrears or in advance

(1) Where the total income of an assessee is assessed at a rate higher than the rate at which it would otherwise have been assessed, due to the following receipts,—

(a) a sum in the nature of arrear or advance salary; or

(b) salary for more than twelve months in any one tax year; or

(c) a payment in the nature of “profits in lieu of salary” under section 18(1); or

(d) arrears of “family pension” as defined in section 93(1)(d), the Assessing Officer shall on an application made to him by the assessee in this behalf, grant such relief, as may be prescribed.

(2) No relief shall be granted on any income on which deduction has been claimed by the assessee in section 19(1)(Table: Sl. No. 12) for any amount mentioned therein, for such, or any other, tax year. Relief from taxation in income from retirement benefit account maintained in a notified country.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 157	INCOME-TAX ACT, 1961 -- s. 89
s. 157(1)(a) -- arrear / advance salary	1961 s. 89(1) read with Rule 21A(2)
s. 157(1)(b) -- salary for >12 months in one tax year	1961 s. 89(1) Rule 21A(3)
s. 157(1)(c) -- profits in lieu of salary u/s 18(1)	1961 s. 89(1) Rule 21A(4)
s. 157(1)(d) -- family pension arrears (s. 93(1)(d))	1961 s. 89(1) Rule 21A(5)
s. 157(2) -- no double-relief with s. 19(1) Table Sl. 12 deduction	1961 s. 89 Proviso (FA 2008)

STATUTORY ARCHITECTURE / RELIEF METHODOLOGY

The relief mechanism (per 1962 Rule 21A / 2026 successor): Step 1: Compute tax on ACTUAL year's total income (as it stands with the lump-sum receipt). Step 2: Re-allocate the lump-sum receipt back to the year(s) to which it relates; recompute tax for each such year as if the relevant portion had been received in that year. Step 3: Sum of recomputed taxes (across years to which relates). Step 4: RELIEF = Step 1 tax - [original tax for current year on income excluding lump-sum] - [aggregate of incremental tax in target years from re-allocated portion]. Effectively: arrears taxed at lower-bracket of historical year rather than current bunched rate. FOUR COVERED RECEIPTS: (a) ARREAR / ADVANCE SALARY -- back-pay scales / pay commission revisions / advance salary; (b) SALARY FOR > 12 MONTHS -- e.g., career-end payouts in one return; (c) PROFITS IN LIEU OF SALARY -- s. 18(1) (1961 s. 17(3)) -- terminal payments / golden handshake / non-compete; (d) FAMILY-PENSION ARREARS -- s. 93(1)(d) (1961 s. 57(iia)) -- recipient's pre-deduction relief. PROCEDURAL: application to AO; Form 10E filed BEFORE return-filing (CBDT Notification 2014 makes Form 10E mandatory); 1961 Rule 21A specifies methodology, preserved under 2026 Rules.

ANTI-DOUBLE-RELIEF (sub-s. 2)

Sub-s. (2) prohibits relief on income for which deduction has been claimed under s. 19(1) Table Sl. No. 12 (FA 2008 carve-out for retrenchment compensation / VRS / PF / gratuity etc. covered under s. 19 deduction). Prevents double-relief: e.g., VRS payment qualifying for s. 19(1) Sl. 12 deduction (1961 s. 10(10C)) -- NO ADDITIONAL s. 157 relief. Sequential: claim s. 19 deduction OR s. 157 relief -- not both.

CASE LAW / DEPARTMENTAL

(i) CBDT Notification dated 12-12-2014 -- Form 10E mandatory pre-filing for s. 89(1) [now s. 157] relief. Failure leads to disallowance. (ii) CIT v. National Insurance Co. (Cal HC) -- pay commission arrears: s. 89 relief available by re-allocation to historical years. (iii) Pre-FA 2008: VRS-cum-89 double-relief was contested; FA 2008 closed the loop -- now codified in sub-s. (2). (iv) Pension-arrears cases (Madanlal Hariram v. ITO) -- post-retirement pension revision arrears qualify.

PLANNING NOTES

(i) FORM 10E FIRST -- file electronically on income-tax e-portal BEFORE submitting ITR; without Form 10E, relief disallowed. (ii) ARREAR PAYSLIP DETAIL -- collect employer breakup of arrear / current-year salary by reference period; needed for Rule 21A reallocation. (iii) PAY COMMISSION ARREARS -- common scenario; PSU / Govt employees should compute relief; the 6th / 7th / 8th Pay Commission rollouts triggered widespread s. 157 claims. (iv) VRS / RETIREMENT BENEFIT -- choose between s. 19(1) Sl. 12 deduction OR s. 157 relief; usually s. 19 deduction wins for amounts up to INR 5L (full deduction).

CROSS-REFERENCES

Section 18(1) -- Profits in lieu of salary (sub-s. 1(c)).
Section 19(1) Table Sl. 12 -- Salary deductions (sub-s. 2).
Section 93(1)(d) -- Family pension definition (sub-s. 1(d)).
Section 122 -- Total income / Chapter computation.
Income-tax Rules, 2026 r. 21A (successor) -- relief methodology.
Form 10E -- mandatory pre-filing for s. 157 relief.
CBDT Notification 12-Dec-2014 -- Form 10E mandatory.

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