Arrears of Salary is the term used for the unpaid salary due to an employee for the previous period. Sometimes, the salary may be revised or increased, but the payment may be delayed or made retrospectively. In such cases, the extra amount paid later is called salary arrears. The employer should show this amount separately in the salary slips and part B of Form 16.
Salary arrears are considered salary income in the ITR and are taxable in the year of receipt. However, some taxpayers may be concerned about paying higher taxes because of a higher tax bracket in the year of receipt or due to a change in the slab rate. To avoid this, the taxpayer can claim relief under Section 89.