Employee PF/ESI contribution — disallowance if deposited late

Employee's contribution to PF / ESI / pension fund deducted from salary is DEDUCTIBLE ONLY IF paid into the relevant fund by the DUE DATE under that fund's law (typically 15th of following month). Late deposit → permanent disallowance forever.

Key points

• §36(1)(va) allows deduction for sums received by the assessee from EMPLOYEES towards their contribution to any provident fund, ESI fund, pension fund, superannuation fund, or any fund for the welfare of such employees — PROVIDED the sum is credited by the assessee to the employee's account in the relevant fund ON OR BEFORE THE DUE DATE prescribed by that specific fund's governing law (EPF — 15th of following month + 5-day grace;
• ESI — 15th of following month).
• The Supreme Court in CHECKMATE SERVICES (Civil Appeal 2833/2016, decided 12-Oct-2022) settled the long-running controversy: §36(1)(va) is DIFFERENT from §43B — the §43B grace period (allowed if paid on / before the §139(1) return-filing due date) does NOT rescue late EMPLOYEE contributions.
• Once the under-lying-fund-law due date is missed, the deduction is PERMANENTLY LOST for that year — there is no second chance.
• The EMPLOYER's contribution remains governed by §43B and is rescued if paid by §139(1) due date.
• Disclosed in Clause 20(b) of Form 3CD.

Reference: §36(1)(va) read with Checkmate (SC), ITA 1961