Salary Arrears Received After Employer Closure: Form 10E and Evidence Reconstruction
By Ravi Sisodia · Reviewed by CA Divyanshu Sengar · Updated 5 October 2026
2-minute summary
- Salary arrears received after an employer closes can still be reconstructed for tax purposes; employer closure does not erase the year to which the salary relates. For AY 2026-27 and other legacy years, relief for arrears under old section 89 uses Form 10E. The Department’s 2026 forms FAQ is critical: for Tax Year 2026-27 under the Income Tax Act, 2025, the corresponding relief statement is new Form 39, not Form 10E.
- Where Form 16 or payroll access is unavailable, rebuild the evidence from appointment letters, salary slips, bank credits, settlement/insolvency correspondence, PF records, court/NCLT orders where relevant and prior returns. The arrear working must allocate the additional salary to the original years before computing relief; a lump-sum current-year entry is not enough.
- Do not claim relief merely because the payment is called arrears. The receipt must fall within the categories eligible for relief under the applicable law/form, and the taxpayer should preserve a year-wise tax comparison showing how the relief was computed.
Current position
Control and evidence map
| # | Control / evidence requirement |
|---|---|
| 1 | Determine whether the arrear relates to an old-Act AY or a new-Act Tax Year before selecting the form. |
| 2 | Prepare a year-wise salary arrear table from available payroll, bank and employment evidence. |
| 3 | Reconstruct prior-year total income/tax figures from filed returns and assessment records. |
| 4 | File Form 10E for applicable legacy relief or Form 39 under the 2025 Act before/with the return as prescribed. |
| 5 | Retain closure/insolvency/settlement evidence explaining why normal employer documents are unavailable. |
Worked example
A company shuts in 2026 and former employees receive Rs 4 lakh of unpaid FY 2024-25 and FY 2025-26 salary through a settlement. The employee should allocate the arrears to those years, reconstruct prior returns and use the old-Act Form 10E route for the corresponding relief computation. A salary arrear arising in Tax Year 2026-27 under the new Act should be routed through Form 39 instead.
Common mistakes
- Using Form 10E automatically for every arrear received after 1 April 2026.
- Claiming section 89-type relief without year-wise reconstruction.
- Abandoning the claim because the employer no longer issues Form 16.
- Using bank receipt date as the only year-allocation evidence.
Frequently asked questions
Has Form 10E disappeared in 2026?
No. It remains applicable for old-Act years such as AY 2026-27; Form 39 is the new-Act form for Tax Year 2026-27 onward.
What if the employer has closed?
Reconstruct the salary and prior-year figures from independent records and retain evidence of closure/settlement.
Is every delayed salary eligible for relief?
Eligibility depends on the applicable law and the nature of the receipt; complete the prescribed form and computation.
Official sources
- Income Tax Department - Income Tax Forms FAQs - new form mapping under Income Tax Act, 2025 (Current forms FAQ; 2026)
- Income Tax Department - Income Tax Returns FAQs - 1961 Act / 2025 Act transition (Current FAQ; 2026)
- Income Tax Department - Income Tax Act, 2025 - official transition and guidance hub (Income-tax Act, 2025; effective 2026-04-01)
Disclaimer
Educational and professional reference only; confirm the current law, rates and the facts of your case before relying on this page.