The Statutory Brief

IT Act 1961 → 2025 / Section 36(1)(va)

Business income

Section 36(1)(va) → Section 29(1)(e)

Employees' PF/ESI contribution deducted from salary — deduction for the employer

Section 36(1)(va) of the old Income-tax Act, 1961 · new section 29(1)(e) under the Income-tax Act, 2025

New reference Section 29(1)(e)

Income-tax Act, 1961Section 36(1)(va)

  • Employee's share of PF/ESI deducted from salary is income of the employer (2(24)(x))
  • Deduction only if deposited by the due date under the PF/ESI law
  • 43B grace (till return due date) does not apply — Checkmate Services (SC, 2022)
  • Even one day's delay meant permanent disallowance

Applies to FY 2025-26 (AY 2026-27) and earlier years.

Income-tax Act, 2025Section 29(1)(e)

  • Section 29(1)(e): deduction allowed if credited to the employee's account on or before the due date of the return under section 263(1)
  • Substituted by Finance Act 2026 with effect from 1 April 2026
  • Late deposit within the return due date is no longer disallowed
  • Interest/damages under the PF and ESI laws for late deposit still apply

Applies from tax year 2026-27 (from 1 April 2026).

What changed

A real relief. Finance Act 2026 replaced the strict 'due date under the welfare law' test with the return due date, reversing the effect of Checkmate Services for tax year 2026-27 onwards.

Practice notes

  • For FY 2025-26 (AY 2026-27) and earlier, the old rule and Checkmate Services still apply — late deposits are disallowed.
  • Tax auditors: Form 3CD reporting of delayed employee contributions will need revisiting for tax year 2026-27.
  • Employer's own contribution remains governed by 43B (now section 37) — deductible on payment by the return due date.

These are summaries, not the statutory text. Read the bare Act for both sections on the Income Tax Department's official site, which also has a side-by-side comparison utility.

Frequently asked

Is late PF deposit of employee contribution allowed under the new Income Tax Act?

Yes, from tax year 2026-27. Section 29(1)(e) of the Income-tax Act, 2025 (as substituted by Finance Act 2026) allows the deduction if the amount is credited on or before the due date of filing the return.

Does Checkmate Services still apply?

It applies to FY 2025-26 and earlier years under section 36(1)(va) of the 1961 Act. The 2025 Act's amended section 29(1)(e) changes the position from tax year 2026-27.

What is section 36(1)(va) called in the new Income Tax Act?

Section 29(1)(e) of the Income-tax Act, 2025.

What changed in section 36(1)(va) under the new Income Tax Act?

A real relief. Finance Act 2026 replaced the strict 'due date under the welfare law' test with the return due date, reversing the effect of Checkmate Services for tax year 2026-27 onwards.

Is section 36(1)(va) still applicable for FY 2025-26?

Yes. Income of FY 2025-26 (AY 2026-27) and earlier years is governed by section 36(1)(va) of the 1961 Act. Section 29(1)(e) of the 2025 Act applies from tax year 2026-27.

Related sections

43B→37Deductions allowed only on actual payment (taxes, PF, bonus, leave encashment, MSME dues)36→29–32Other deductions — insurance, bonus, interest, bad debts, employer contributions44AB→63Tax audit of accounts for businesses and professions above turnover limits28–44A→26–57Business income charge, rent/repairs, other deductions (36), deemed profits (41), actual cost (43), forex, ICDS, insurance