Salary Arrears Relief Under Section 157: How Form 39 Works
Salary arrears can push you into a higher slab or past the ₹12 lakh rebate. Section 157, the old 89(1), taxes them as if paid on time. A worked example, and how to file Form 39, the old Form 10E.
Updated 27 September 2026 · 4 minute read
If you receive salary that belongs to an earlier year, section 157 of the Income-tax Act, 2025 lets you pay tax on it as if it had been paid on time. Without it, a lump sum of arrears is added to this year's income and can push you into a higher slab, or past the ₹12 lakh rebate, in one go. Section 157 is the old section 89(1). You claim the relief by filing Form 39, which replaced Form 10E, online before you file your return.
The relief also covers salary paid in advance, arrears of family pension, and some lump sums such as gratuity, retrenchment compensation and commuted pension. This guide sticks to salary arrears, which is where most claims come from.
How the relief is worked out
You compare two amounts of extra tax:
- This year: tax on your income with the arrears, minus tax on your income without them.
- The year the arrears belong to: tax on that year's income with the arrears added, minus tax on it as it was, using that year's slabs and regime.
If the first is bigger, the difference is your relief. In effect you pay the extra tax you would have paid back then, not the extra tax the lump sum causes today.
A worked example
Priya earns ₹11.5 lakh in tax year 2026-27, in the new regime. In August 2026 she receives ₹2 lakh of arrears from a pay revision that applied to FY 2024-25, when she earned ₹9 lakh, also in the new regime.
This year, tax year 2026-27
| Without arrears | With arrears | |
|---|---|---|
| Gross salary | ₹11,50,000 | ₹13,50,000 |
| Taxable, after the ₹75,000 standard deduction | ₹10,75,000 | ₹12,75,000 |
| Tax including cess | ₹0, within the ₹12 lakh rebate | ₹74,100 |
| Extra tax from the arrears | ₹74,100 |
The year the arrears belong to, FY 2024-25
| As it was | With arrears added | |
|---|---|---|
| Gross salary | ₹9,00,000 | ₹11,00,000 |
| Taxable, after the ₹75,000 standard deduction | ₹8,25,000 | ₹10,25,000 |
| Tax including cess, at that year's slabs | ₹33,800 | ₹55,900 |
| Extra tax from the arrears | ₹22,100 |
Her relief is ₹74,100 minus ₹22,100, which is ₹52,000. She pays ₹22,100 on the arrears instead of ₹74,100. The relief is so large here because the arrears pushed her past the rebate: without them her tax this year would be nil.
If the arrears belonged to a year when you were in the old regime, that year's computation uses the old-regime slabs and deductions. The income tax calculator gives the current year's figures; for an earlier year, use that year's slabs.
When there is no relief
If your income was higher in the earlier year, or that year's slabs were steeper, the extra tax back then can come out larger than the extra tax now. Then the relief is nil. You simply pay tax on the arrears this year, and there is nothing to claim.
Filing Form 39
- Online only. Form 39 is filed on the income tax e-filing portal with your PAN. It has two parts: basic details, and a computation table for the kind of receipt.
- Before your return. The law sets no deadline, but the relief in your return depends on it, so file Form 39 first. Filing it is mandatory if you claim the relief.
- Get it right the first time. Once submitted and verified, Form 39 cannot be edited.
- Keep the paperwork. Salary details for each year the arrears relate to, your tax computations for those years, and proof of the payment, such as your employer's letter on the pay revision.
Your employer can also give you the relief through TDS. If you give it the particulars in Form 39 during the year, it can take the relief into account under section 392 instead of deducting tax on the full lump sum. You still file Form 39 yourself for your return.
Arrears received before 1 April 2026
Arrears received up to 31 March 2026 fall under the old Act. The relief there is section 89(1), claimed on Form 10E, and it goes with the return for FY 2025-26, due in 2026. Form 39 and section 157 are for arrears received from 1 April 2026, which you claim in the return for tax year 2026-27, filed in 2027. The tax year guide explains the switch between the two Acts.
Frequently asked questions
What is section 157 of the Income-tax Act, 2025?
It gives relief when salary arrears, advance salary or some other lump sums are received in one year. The tax is worked out as if the money had been paid in the years it belongs to. It replaced section 89(1) of the old Act.
Is Form 39 the same as Form 10E?
Yes. Form 39 replaced Form 10E from tax year 2026-27, under rule 73 of the Income-tax Rules, 2026. It is redesigned, with computation tables and fewer repeated entries, but claims the same relief.
Can I claim relief without filing Form 39?
No. Form 39 is mandatory if you claim relief under section 157. A claim in your return without it is not allowed.
Is relief for salary arrears available in the new regime?
Yes. The relief works in both regimes. Each year in the computation uses the regime and slabs you were actually in for that year.
Can my employer give me the relief?
Yes. If you give your employer the particulars in Form 39, it can account for the relief while deducting TDS. You still need to file Form 39 on the portal for your return.