Employee Provident Fund (EPF) is one of the important platforms of savings in India almost for all people working in Government and Private or Public Sector Organizations. A provident fund should be created with a purpose of providing financial security and stability to elderly people. Its purpose is to help employees save a fraction of their salary every month which can be utilized when the employee is temporarily or no longer fit to work or at retirement. It is beneficial for the employees upon termination of their employment. Contribution in the fund shall be as:   

• Employee- 12% of basic salary and dearness allowances. However, employees have option to contribution more than 12%.
• Employer- 12% of basic salary and dearness allowances.

 Tax deduction in respect of contribution shall be allowed as:

For employees, the total amount that is to be deducted towards EPF during the financial year is eligible for deduction under section 80C.

For employers’, we need to understand following sections of the Act-

Section 36(1) (va) any sum received by the assessee from any of his employees in respect to his contribution and 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.

For the purposes of this clause, “due date” means the date by which the assessee is required as an employer to credit an employee’s contribution to the employee’s account in the relevant fund under respective Act.

Section 43B clarifies that Employees contribution to provident fund shall be allowed as deduction only when the payment of the same is made on or before the due date mentioned under the respective welfare Acts.

Employers contribution to provident fund shall be allowed as deduction even when the payment of the same is made on or before the due date of furnishing the return of income u/s 139 (1) in respect of the previous year in which the liability to pay such sum was incurred.

In Commissioner of Income Tax vs. South India Corporation Limited, the High Court ruled that a combined reading of clause section 36(1) (va) and section 43B makes it clear that if the assessee (employer) credited any sum received by him from any of his employees on or before the due date, that is, the date by which the assessee (employer) is required to credit the employees’ contribution to the Provident Fund, he will be entitled to deduct the said amount in computing his business income.

Hence, employees’ contribution to Provident Fund after its due date shall be disallowed.

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