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Late payment of employees share towards ESI and PF

16 March 2023

Diallowance of expenditure if payment of employees' share towards ESI and PF is made after due date of respective fund (i.e. 15th of next month). This amendment is applicable from which assessment year?

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CA Rakesh Ishi (Working at Private Company) (8202 Points)
Replied 17 March 2023

Disallowance of expenditure if payment of employees' share towards ESI and PF is made after the due date of the respective fund was introduced by the Finance Act, 2021, and is applicable from the assessment year 2021-2022 onwards

According to the amendment, if an employer fails to pay the employees' contribution towards ESI or PF on or before the due date specified by the respective fund (i.e., the 15th of the following month), the expenditure incurred by the employer towards such contributions will be disallowed as a deduction while computing the employer's taxable income.

This amendment aims to encourage timely payment of employees' contributions towards ESI and PF by employers and ensure compliance with the relevant laws. It is important for employers to ensure that the contributions are paid on time to avoid disallowance of the corresponding expenditure as a deduction while computing their taxable income