Relief for Salary Received in Arrears or Advance: Section 157 and Form 39 (Income-tax Act, 2025)

If you receive salary arrears, advance salary, or more than twelve months of salary in one tax year, the extra amount can push you into a higher tax slab. Section 157 of the Income-tax Act, 2025 lets you apply for relief so that you are not taxed more than you would have been had the money arrived in the years it belongs to. The relief is worked out under rule 73 and claimed with Form 39.

This guide covers who can claim, the step-by-step formula, a table of other receipts that get relief (gratuity, compensation, commutation of pension), who you give Form 39 to, and two worked calculations. Every point is taken from the Act as amended by the Finance Act, 2026 and the Income-tax Rules, 2026, with the section or rule number shown.

When does section 157 give relief?

Section 157(1) applies where your total income is assessed at a rate higher than the rate at which it would otherwise have been assessed, because of any of these receipts:

• a sum in the nature of arrear salary or advance salary;
• salary for more than twelve months in one tax year;
• a payment in the nature of "profits in lieu of salary" under section 18(1) (for example, compensation received from an employer at or in connection with termination of employment, or a payment received before joining or after leaving an employer);
• arrears of "family pension" as defined in section 93(1)(d).

Relief is not automatic. The Assessing Officer grants it on an application made by you, and the amount is "as may be prescribed", which is where rule 73 comes in.

How is the relief on arrears or advance salary calculated?

Rule 73(1), Table Sl. No. 1 sets out the formula. In plain terms: tax the extra amount at the rate of the year you received it, then tax it again in the year(s) it relates to. If the first figure is bigger, the difference is your relief.

Relief = A minus B, if A is more than B.

The rule's own definitions, in the order they appear:

Letter	Meaning (rule 73(1), Table Sl. No. 1)
C	Tax on total income of the tax year in which you received the amount
D	Tax on total income reduced by the additional salary or additional family pension
A = C - D	Tax on the additional amount in the year of receipt
F	Tax on an earlier year's total income, increased by the part of the additional amount that relates to that year
G	Tax payable on that earlier year's total income
E = F - G	Tax on the additional amount for that earlier year
B	Total of E for all the years the amount relates to

The rule calls the amount "additional salary" (or "additional family pension"). It covers any portion of salary received in arrears or in advance, and any portion of family pension received in arrears.

In which year is arrears or advance salary taxed?

Section 15(1) makes three kinds of salary chargeable in the tax year: salary due to you in that year, whether paid or not; salary paid or allowed in that year even though it is not yet due (advance salary); and arrears of salary paid or allowed in that year, if they were not charged to tax for any earlier tax year. So arrears are taxed in the year you receive them, which is why relief under section 157 is needed. For advance salary, section 15(3) says it is not included again in your total income when it later falls due.

What does a worked example look like?

Example 1: arrears for one earlier year. Ravi works for a company. In the tax year 2026-27 he receives Rs 4,00,000 as arrears of a pay revision, all relating to 2025-26.

Assumptions: Ravi's total income for 2026-27 including the arrears is Rs 22,00,000. His 2025-26 total income without the arrears was Rs 14,00,000. For simplicity the slab table of section 202(1) is used for both years, and rebate, surcharge and cess are ignored. For a real claim, use the rates that applied to the earlier year.

The section 202(1) slabs used: up to Rs 4,00,000 nil; 4,00,001 to 8,00,000 at 5%; 8,00,001 to 12,00,000 at 10%; 12,00,001 to 16,00,000 at 15%; 16,00,001 to 20,00,000 at 20%; 20,00,001 to 24,00,000 at 25%; above 24,00,000 at 30%.

Step	Working	Amount (Rs)
1	Additional salary relates to 2025-26 only	4,00,000
C	Tax on 22,00,000: 20,000 + 40,000 + 60,000 + 80,000 + (2,00,000 x 25% = 50,000)	2,50,000
D	Tax on 18,00,000: 20,000 + 40,000 + 60,000 + (2,00,000 x 20% = 40,000)	1,60,000
A	C - D	90,000
F	Tax on 14,00,000 + 4,00,000 = 18,00,000	1,60,000
G	Tax on 14,00,000: 20,000 + 40,000 + (2,00,000 x 15% = 30,000)	90,000
E = B	F - G	70,000
Relief	A - B = 90,000 - 70,000	20,000

The arrears were taxed at up to 25% in 2026-27, but they would have fallen in slabs of 15% to 20% in 2025-26. The Rs 20,000 is the difference.

Example 2: arrears spread over two earlier years. Meena receives Rs 6,00,000 of arrears in 2026-27: Rs 3,00,000 for 2024-25 and Rs 3,00,000 for 2025-26.

Assumptions: Total income for 2026-27 including the arrears is Rs 26,00,000. Income without the arrears was Rs 9,00,000 in 2024-25 and Rs 11,00,000 in 2025-26. Same simplifications as above.

Step	Working	Amount (Rs)
C	Tax on 26,00,000: 3,00,000 (up to 24,00,000) + (2,00,000 x 30% = 60,000)	3,60,000
D	Tax on 20,00,000	2,00,000
A	C - D	1,60,000
E for 2024-25	F: tax on 12,00,000 = 60,000. G: tax on 9,00,000 = 20,000 + 10,000 = 30,000. F - G	30,000
E for 2025-26	F: tax on 14,00,000 = 90,000. G: tax on 11,00,000 = 20,000 + 30,000 = 50,000. F - G	40,000
B	30,000 + 40,000	70,000
Relief	A - B = 1,60,000 - 70,000	90,000

Which other receipts get relief under rule 73?

Section 157(1)(c) covers "profits in lieu of salary" under section 18(1), and rule 73 gives each type its own formula. For these, relief compares the average rate of tax in the year of receipt (R1) with the average of the rates you would have paid had the amount been spread over earlier years (RAvg). Relief is given only if R1 exceeds RAvg.

Rule 73(1) Sl. No.	Receipt	Relief	Spread over
1	Salary in arrears or advance; family pension in arrears	A - B (steps above)	The years it relates to
2	Gratuity for past service of five years or more but less than fifteen years	G x (R1 - RAvg), where RAvg = (R2 + R3) / 2	One-half added to each of the two preceding years
3	Gratuity for past service of fifteen years or more	G x (R1 - RAvg), where RAvg = (R2 + R3 + R4) / 3	One-third added to each of the three preceding years
4	Compensation from the employer or former employer at or in connection with termination of employment, after at least three years' continuous service and with at least three years of the term unexpired	C x (R1 - RAvg), where RAvg = (R2 + R3 + R4) / 3	One-third added to each of the three preceding years
5	Commutation of pension	P x (R1 - RAvg), where RAvg = (R2 + R3 + R4) / 3	One-third added to each of the three preceding years

Here R1 is the average rate of tax on your total income including the receipt in the year you received it. R2, R3 and R4 are the average rates for the preceding tax years (Y2, Y3, Y4), each computed on that year's total income increased by the stated fraction of the receipt. The "average rate" is tax divided by total income.

For any other receipt, rule 73(2) lets the Board allow such relief as it deems fit, having regard to the circumstances of the case.

How do I claim the relief? Form 39 and the deadline

• Form 39: Under rule 73(3), you furnish the particulars in Form No. 39 on or before the due date in section 263(1)(c), the due date for filing your return.
• Through your employer: Under rule 73(4), if you are a Government servant or an employee in a company, co-operative society, local authority, university, institution, association or body, you may give Form 39 to the person responsible for paying your salary. Section 392(4) lets that payer take the relief into account when deducting tax, which can reduce the TDS on your salary.

The return due dates in section 263(1)(c), falling in the financial year after the tax year, are:

Person	Due date
Assessee, including partners of a firm or their spouse, where section 172 applies	30 November
Company; assessee whose accounts are required to be audited; partner of a firm whose accounts are audited (or such partner's spouse), where section 172 does not apply	31 October
Business or professional assessee whose accounts are not required to be audited (and partners of such firms or their spouse), where section 172 does not apply	31 August
Any other assessee (for example, a salaried individual)	31 July

Can I claim relief and the voluntary retirement deduction on the same money?

No. Section 157(2) says no relief is granted on any income on which you have claimed a deduction under section 19(1), Table Sl. No. 12, for any amount mentioned there, for that or any other tax year. Sl. No. 12 covers amounts received on voluntary retirement or termination of service under a qualifying scheme, deductible up to the lower of the compensation received and Rs 5,00,000.

Real-life examples

Ravi, the pay revision. Ravi's employer notified a pay revision in July and paid the back pay for the previous tax year in one go. Ravi sees his TDS jump for the month. Because the back pay relates to that earlier year, he fills Form 39 with the year-wise split and gives it to the payroll team (rule 73(4)). The employer can account for the relief while deducting tax under section 392(4).

Meena, the family pension. Meena's husband, an employee, passed away and the pension office released three years of family pension arrears to her together. Section 93(1)(d) defines family pension and section 157(1)(d) brings the arrears within the relief. Meena claims through Form 39 on or before her return due date.

Arun, the voluntary retirement. Arun takes a voluntary retirement scheme payout and claims the section 19(1), Sl. No. 12 deduction on it. He then considers also asking for section 157 relief on the same payout. Section 157(2) blocks relief on income for which he has claimed that deduction, so he cannot use both on the same amount.

Common mistakes

• Assuming relief is automatic. It is granted on an application, using Form 39.
• Not splitting arrears year by year. Step 1 requires the amount relating to each year. Without that split, B cannot be worked out.
• Using the wrong tax year's rates. F and G use each earlier year's own tax rules, not the current year's.
• Missing the deadline. Form 39 must be furnished by the section 263(1)(c) due date.
• Claiming relief and the voluntary retirement deduction together. Section 157(2) bars it.
• Treating a negative result as a claim. If A is not more than B, there is no relief.

Where this is in the Act

• Section 157(1): relief for arrears, advance salary, salary for more than twelve months, profits in lieu of salary and family pension arrears
• Section 157(2): no relief where a section 19(1), Sl. No. 12 deduction is claimed
• Section 18(1): profits in lieu of salary
• Section 93(1)(d): family pension
• Section 19(1), Table Sl. No. 12: voluntary retirement deduction
• Section 202(1): slab rates used in the examples
• Section 263(1)(c): return due dates
• Section 392(4): payer takes relief into account while deducting tax on salary
• Rule 73(1) to (4): formulas, Form 39 and where to file it

For how salary is taxed and how employers deduct tax, see our guides to income from salary under the 2025 Act and TDS on salary.

For a CA firm, the hard part is remembering which salaried clients received arrears or a settlement this year and whose Form 39 is pending before the return due date. Finexo's practice management software lets you track these client tasks and deadlines in one place. It does not compute the relief for you.

This article explains the Income-tax Act, 2025 (as amended by the Finance Act, 2026) and the Income-tax Rules, 2026. It is general information, not tax advice. The worked examples are simplified illustrations. Confirm the position for a specific case with a qualified chartered accountant.