How arrears are calculated
Revised gross = Revised basic + Revised basic × Revised DA%
Total arrears = (Revised gross − Old gross) × Number of months
Arrears arise whenever a revision is approved with a retrospective effective date. DA hikes are the most common example: the government announces the January and July revisions a few months late, and the difference for the intervening months is paid as a lump sum with the next salary.
Worked example: the January 2026 DA hike
DA for central government employees rose from 58% to 60% with effect from 1 January 2026, but it was paid only from a later month. For an employee on a basic pay of ₹44,900 who received the old rate for three months:
| DA at 58% | ₹26,042 / month |
| DA at 60% | ₹26,940 / month |
| Difference | ₹898 / month |
| Arrears for 3 months | ₹2,694 |
Transport allowance also carries DA, so the actual arrear is slightly higher if you receive TA. When the 8th Pay Commission is implemented, arrears from its effective date are expected to be far larger, since the basic pay itself will change. You can model that with the 8th Pay Commission calculator.
How arrears are taxed and Section 89(1) relief
Arrears are taxed as salary in the year you receive them, not the year they relate to. If the lump sum pushes you into a higher slab, you can claim relief under Section 89(1) by filing Form 10E on the income tax portal before filing your return. The relief recalculates tax as if the arrears had been paid in the years they belong to, and gives you the difference.
Under the new regime, many government employees stay under the ₹12 lakh taxable limit even after arrears, in which case there is no extra tax to relieve.
Frequently asked questions
What are salary arrears?
The difference between what you were paid and what you should have been paid for a past period, typically after a DA hike, increment or pay revision applied with retrospective effect.
Are arrears taxable?
Yes, as salary in the year of receipt. Section 89(1) relief through Form 10E can reduce the extra tax if the arrears push you into a higher slab.
Is DA arrear calculated on basic pay only?
DA is calculated on basic pay. Allowances that are linked to DA, such as transport allowance, also produce arrears.
When will 8th Pay Commission arrears be paid?
Only after the government accepts the commission's report, which is expected around mid-2027. Arrears would then be paid from the effective date the Cabinet approves.