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Section 89 is meant to provide relief from tax paid on arrears of salary received in lump sum on the basis of recalculation of salary in the preceding years on spread over of such arrears. The Delhi High Court in the case of CIT v. S N Chadha (2001) 118TAX520 held that a salaried individual is eligible for a relief u/s 89 even in respect of leave encashment that is received for a period of more than 12 months. This is a welcome decision for employees who have been relieved from services during 2000-01and have suffered higher tax rate of 35%.

On the basis of this decision it may be possible to claim similar such relief on the amount of other retiral benefits such as SAF, PF, exgratia etc.

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