• Introduction

Income of the assessee includes any sum received by the assessee from his/her employees as contribution to

• Employer contribution vs Employee Contribution

A clear distinction between Employer‘s contribution towards welfare funds such as ESI and PF and Employee s contribution towards welfare ‘funds should be made as Employee‘s contribution is employee’s own money and the employer deposits this contribution on behalf of the employee in fiduciary capacity. By late deposit of employee contribution, the employers get unjustly enriched by keeping the money belonging to the employees. Clause (va) of sub-section (1) of Section 36 of the Act was inserted to the Act vide Finance Act 1987 as a measures of penalizing employers who mis-utilize employee‘s contributions.

• Employee contribution to PF allowable on Payment before due date

• Deduction pertaining to any sum received by the assessee from any of his employees would be allowed if such sum is credited by the assessee to the employee’s account in the relevant fund or funds on or before the due date.
• Due Date here means the date by which the assessee is required to credit an employee’s contribution to the employee’s account in the relevant fund under any Act, rule, order or notification issued there-under or under any standing order, award, contract of service or otherwise.
• The second Proviso to s. 43B (b) provides that any sum paid by the assessee as an employer by way of contribution to any provident etc fund shall be allowed as a deduction only if paid on or before the due date
• Deduction would be permissible only on actual payment as employees’ contribution being in the nature of trust money in the hands of the assessee.
• The Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. As per the Income-tax Act , the assessee can get the benefit if the actual payment is made before the return is filed.

• Conditions to avail deduction

• BUDGET 2021

Before VS After

Disclaimer:“Information contained herein is for informational purposes only and should not be used in deciding any particular case. The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts have been made to provide authentic information, it is suggested that to have better understanding and obtaining professional advice after thorough examination of particular situation.”

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Prepared By

Khyathi Hegde

Articled Assistant

Date: 02-03-2021