Rule 73 of Income explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 73 of the Income-tax Rules, 2026 prescribes the relief available under section 157(1) where a receipt pushes total income into a higher rate — arrears or advance salary, arrears of family pension, gratuity for five to fifteen years of past service, termination compensation and commutation of pension. The claim is made in Form No. 39, replacing Form 10E, on or before the due date under section 263(1)(c).
When rule 73 applies
The opening words define the trigger precisely. Relief arises where the total income of an assessee for a tax year (the "relevant tax year") is assessed at a rate higher than the rate at which it would otherwise have been assessed, on account of a receipt listed in column B of the Table. The relief is then as specified in column C.
The rule replaces rules 21A and 21AA of the Income-tax Rules, 1962, and gives effect to section 157(1) of the Income-tax Act, 2025 — the successor to section 89.
Sl. No. 1 — arrears or advance salary, and arrears of family pension
This covers any portion of salary received in arrears or in advance, or any portion of family pension received in arrears — the rule calls these the "additional salary" or "additional family pension".
Relief = A − B, if A exceeds B, where A = C − D and B = the aggregate of E, and E = F − G. The rule sets out four steps:
| Step | What it does |
|---|---|
| Step 1 | Where the additional salary or additional family pension relates to one or more tax years, ascertain those tax years and the amount relating to each. |
| Step 2 | Calculate A = C − D, where C = tax on total income of the relevant tax year, and D = tax on total income as reduced by the additional salary or family pension, as if the reduced income were the total income of the relevant tax year. A is the tax on the additional amount in the relevant tax year. |
| Step 3 | Calculate E = F − G for each tax year found in Step 1, where G = tax payable on the total income of that tax year, and F = tax payable on that total income as increased by the amount relating to that year, as if the increased income were the total income of that year. E is the tax on the additional amount in each earlier year. |
| Step 4 | B = the aggregate of the E values for all the tax years ascertained in Step 1. |
The logic is the familiar one: compare the tax cost of receiving the money now against the tax cost of having received it in the years it related to, and relieve the difference — but only where receiving it now is worse.
Sl. No. 2 — gratuity for five to fifteen years of past service
The receipt is gratuity received in respect of past services extending over a period greater than or equal to five years but less than fifteen years.
Relief = G × (R1 − RAvg), if R1 exceeds RAvg, where:
- RAvg = (R2 + R3 + R4) / 3;
- R2 = average rate of tax on the total income for Y2 as increased by one-third of the gratuity received, as if the income so increased were the total income of that tax year;
- R3 = the same computation for Y3;
- R4 = the same computation for Y4;
- Y1 = relevant tax year; Y2 = the tax year immediately preceding Y1; Y3 = the tax year immediately preceding Y2; Y4 = the tax year immediately preceding Y3.
The structure is a three-year averaging: one-third of the gratuity is notionally added to each of the three preceding years, an average rate is derived, and the relief is the gratuity multiplied by the excess of the current year's rate over that average.
Sl. No. 4 — compensation on termination of employment
The receipt is compensation received from the employer or former employer at or in connection with the termination of employment, where:
- the employee had continuous service of not less than three years; and
- the unexpired portion of the term of employment is also not less than three years.
Relief = C × (R1 − RAvg), if R1 exceeds RAvg, on the same Y1 to Y4 three-year averaging basis, with one-third of the compensation amount notionally added to each of Y2, Y3 and Y4.
The condition is conjunctive: three years of completed continuous service and three years of unexpired term. A long-serving employee whose contract had less than three years left, and a new employee on a long contract, both fail — for opposite reasons. Check the employment contract's remaining term, not only the service record.
Sl. No. 5 — commutation of pension
Relief = P × (R1 − RAvg), if R1 exceeds RAvg, again on the Y1 to Y4 basis, with Y2, Y3 and Y4 defined as the three tax years immediately preceding in sequence.
The published text layer of the Income-tax Rules, 2026 does not carry Sl. No. 3 of the rule 73 Table, and it drops the explicit definitions of the multipliers G, C and P and of R1 in Sl. Nos. 2, 4 and 5, along with parts of the R2/R3/R4 wording for Sl. Nos. 4 and 5. Everything set out above is what the text actually contains. Before computing relief under Sl. Nos. 2 to 5, or under Sl. No. 3, read the Table to rule 73 directly. This article does not guess at the missing rows.
The residual power — sub-rule (2)
"In case of any other receipts, the Board may, having regard to the circumstances of the case, allow such relief as it deems fit."
The Table is therefore not a closed list. A receipt outside Sl. Nos. 1 to 5 that produces the same rate distortion can be taken to the Board, though relief then depends on the Board's discretion rather than on a formula.
How the claim is made — sub-rules (3) and (4)
| Route | What is filed | When |
|---|---|---|
| Sub-rule (3) — the assessee | The particulars specified in Form No. 39 | On or before the due date specified under section 263(1)(c) |
| Sub-rule (4) — through the employer | The same particulars in Form No. 39, furnished to the person responsible for making the payment referred to in section 392(1) | So the employer can give effect to the relief in salary deduction |
Sub-rule (4) is available to a Government servant, or an employee in a company, co-operative society, local authority, university, institution, association or body. That is a wide list, and it is what allows the relief to be reflected in monthly TDS rather than only at assessment.
Rule 21A and rule 73 compared
| Point | Rules 21A and 21AA (1962) | Rule 73 (2026) |
|---|---|---|
| Parent provision | Section 89 | Section 157(1) |
| Claim form | Form 10E | Form No. 39 |
| Filing deadline | Before filing the return | On or before the due date under section 263(1)(c) |
| Employer route | Available | Available — section 392(1) payer |
| Gratuity averaging | Three preceding years | Three preceding years, one-third each |
| Board's residual power | Present | Present — sub-rule (2) |
Compliance checklist
- Confirm the relevant tax year is actually assessed at a higher rate because of the receipt — no rate distortion, no relief.
- For arrears, complete Step 1 properly: allocate the additional salary to the tax years it relates to before computing anything.
- For gratuity, verify past service is five years or more but less than fifteen.
- For compensation, test both three-year conditions — service completed and term unexpired.
- File Form No. 39 by the section 263(1)(c) due date, and give it to the employer under sub-rule (4) where monthly relief is wanted.
- Read the Table to rule 73 in the book for Sl. No. 3 and for the multiplier and R1 definitions.
- Stop citing section 89, rule 21A and Form 10E for tax year 2026-27 onwards.
Common mistakes
- Claiming relief without filing Form No. 39.
- Filing Form No. 39 after the section 263(1)(c) due date.
- Adding the whole gratuity to each preceding year instead of one-third to each.
- Testing only completed service for termination compensation and ignoring the unexpired term.
- Assuming the Table is exhaustive and not considering the Board's power under sub-rule (2).