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8th Pay Commission arrears and Section 89 relief

Why arrears are likely, how they add up, how they are taxed, and how Section 89 relief can bring the tax down.

Last updated September 2026 · by NE Media

Why there will probably be arrears

Pay commission revisions usually count from a fixed date, but the new pay is paid only after the Government accepts the report and issues orders. For the 8th CPC, the effective date is widely expected to be 1 January 2026, while payment is likely to start later. For every month in between, you are owed the difference between the new pay and what you were actually paid. That lump sum is your arrears.

The 7th CPC is a useful precedent: it counted from 1 January 2016, was approved in June 2016, and the arrears were paid soon after. Arrears were paid on basic pay and DA. HRA and most other allowances were revised later, from 1 July 2017, without arrears.

How arrears are worked out

For each month from the effective date until the new pay starts:

Arrears for the month = 8th CPC pay due − 7th CPC pay actually paid

Both sides change during the period:

• 7th CPC side: you keep getting 7th CPC pay with DA rising every January and July (60% from January 2026).
• 8th CPC side: new basic pay (old basic × fitment factor) with DA restarting at 0% and rising every six months.
• Increments: the yearly increment in July applies on both sides.
• Allowances: if HRA and transport allowance are included, their differences are added too.
• NPS: if you are under NPS or UPS, your 10% contribution on the extra basic pay and DA is deducted from the arrears.

How arrears are taxed

Arrears are salary, and salary is taxed in the year you receive it. Receiving 18 or 24 months of extra pay in one year can push you into a higher tax slab, so you could pay more tax than if the money had been paid month by month. Section 89 of the Income-tax Act exists for exactly this situation.

Section 89 relief, step by step

1. Work out the tax for the year you receive the arrears, with and without the arrears. The difference is the extra tax caused by the arrears.
2. For each earlier year the arrears relate to, work out the tax on that year’s income with and without that year’s share of the arrears. Add up these differences.
3. Relief = step 1 − step 2, if step 1 is larger. In simple terms, you pay tax on the arrears as if they had been paid in the years they belong to.

Worked example

Level 6, basic pay ₹35,400 on 1 January 2026, X class city, fitment factor 2.28, new pay starting January 2028, arrears on basic pay and DA only, new tax regime (estimates from the calculator):

Your own figures depend on your income in each year, your tax regime and the final 8th CPC rules. The calculator’s Arrears tab works this out for your inputs.

How to claim the relief: Form 10E

• File Form 10E online on the income tax e-filing portal for the year you receive the arrears, before filing your income tax return.
• Then claim the relief in your return. If you claim Section 89 relief without filing Form 10E, the Income Tax Department may disallow it.
• Your employer may also consider Section 89 relief while deducting tax (TDS) if you give them the details.