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Under section 89 an employee can claim relief from tax for any arrears or advance of salary meaning thereby that he can take credit for any additional tax payable either by virtue of adverse change in rates or change in rate bracket otherwise applicable in his case after excluding such arrears or advance. In other words he can claim spread over of such sums and recalculate his liability for the purpose of this section.The Madras High Court in the case of Commissioner of Income-tax Vs. M. Raman (120TAX338) held that the amount received by an employee at the time of voluntary retirement of service would qualify for such relief. The same Court earlier in the case of Commissioner of Income-tax Vs. Visalakshi (J.) (74TAX532/206ITR531) held that ex gratia compensation received by an assessee consequent on his resignation from his employment is also admissible for the relief under section 89(1) of the Act. In the same manner lump sum paid to dismissed workmen for back and future wages is also entitled for such relief. This section would also apply in respect of payments received on account of encashment of accumulated leave. Alternatively an employee can claim such relief in his return in the absence of same having been granted by the employer.

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