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Microlesson · 5-min read

Employee Contribution towards PF/ESI/SAF [Sec. 36(1)(va)]

## Employee's Contribution to PF / ESI / Superannuation Fund — Sec. 36(1)(va)

When an employer deducts an employee's contribution from the employee's salary, that money is held in trust until deposited with the relevant fund. The Act treats deposit timing very strictly.

### The Rule

  • Deduction is allowed to the employer if the employee's contribution is deposited on or before the due date under the respective fund's law (e.g., the PF Act, ESI Act).
  • If not deposited by the due date (even if paid before ROI filing), the amount is deemed to be income under PGBP in the year the deduction was made.

### Due Date of Deposit

The relevant fund's due date — generally the 15th of the next month — applies. Section 43B's relaxation does NOT apply to employee contributions (Supreme Court in Checkmate Services).

### Key Distinction

TypeSectionRelief under 43B?
Employer's contribution36(1)(iv)/(iva)Yes — allowed if paid by ROI due date
Employee's contribution36(1)(va)No — must hit fund's own due date

Worked example

### Example 1

Example: An employer deducts ₹50,000 PF from employees' April 2025 salary. Due date under the PF Act = 15 May 2025.

  • If deposited on or before 15 May 2025 → Deduction allowed u/s 36(1)(va).
  • If deposited on 20 May 2025 (even before ROI due date 31 Oct 2026) → ₹50,000 is deemed income under PGBP and permanently disallowed.
  • The employer cannot get this back even in a later year.

⚠️ Common exam mistakes

  • Confusing employer's contribution (where 43B relief applies) with employee's contribution (where it does NOT).
  • Assuming late deposit can be regularised by paying before ROI due date — for employee contributions, the fund's own due date is final.
  • Forgetting that the disallowed amount becomes deemed income and is taxed, not merely postponed.
Bare-Act text Section 36(1)(va) · Income-tax Act, 1961 · click to expand
Section 36(1)(va): Any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, 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.
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