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Annexure I compares two amounts: the extra tax caused by the arrears in the year of receipt, and the extra tax the arrears would have caused if taxed in their own years. The relief is the first minus the second, if positive.
ITR
Working out relief in Annexure I
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Provisions
Sec 89 (now Sec 157); Rule 21A, Income-tax Rules 1962
Analysis
Step one: tax on total income including arrears in the year of receipt, minus tax on income without arrears. Step two: for each earlier year, tax on income plus that year's arrears, minus tax on income as originally assessed. Relief is step one minus the total of step two. Use the tax rates and regime that applied in each year.
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- Compute tax this year with and without arrears
- For each earlier year, compute tax with and without that year's arrears
- Subtract the total earlier extra tax from this year's extra tax
- Enter the figures in Annexure I
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