Finance Bill 2026 Section 29 Amendment

The Finance Bill, 2026 proposes a significant rationalisation of the due date for claiming deduction of employees’ contributions to welfare funds under section 29(1)(e) of the Income-tax Act, 2025.

Currently, an employer can claim deduction only if the employees’ contribution is credited to the relevant fund by the statutory due date prescribed under the respective labour laws, rules, or service conditions. Clause 31 of the Bill seeks to replace this restrictive definition by aligning the due date with the due date for filing the return of income under section 263(1). Under the proposed amendment, employees’ contributions received by the employer will be allowable as a deduction if they are deposited on or before the return-filing due date for the relevant tax year. This change aims to remove timing disputes and bring parity with the treatment of employer contributions. The amendment is prospective and will apply from 1 April 2026, covering tax year 2026-27 and subsequent years. Rationalising the due date to credit employee contribution by the employer to claim such contribution as deduction Section 29 of the Act provides for deductions related to employee welfare. Clause (e)(i) of sub-section (1) of the said section provides for deduction of any amount of contribution received by the assessee being an employer, from an employee to which the provisions of section 2(49)(o) apply, if such amount is credited by the assessee to the account of the employee in the relevant fund or funds by the due date. 2. For the purposes of said clause, “due date” means the date by which the assessee is required as an employer to credit employee contribution to the account of an employee in the relevant fund under any Act, rule, order or notification issued under it or under any standing order, award, contract of service or otherwise. 3. It is proposed to amend section 29(1)(e) to provide that the due date for the said clause shall be the due date of filing of return of income under section 263(1) of the Act. 4. The amendment will take effect from the 1st day of April, 2026 and will, accordingly, apply to tax year 2026-27 and subsequent tax years. [Clause 31] Extract of Relevant Clauses of Finance Bill, 2026 Clause 31 of the Bill seeks to amend section 29 of the Income-tax Act, 2025 relating to deductions related to employee welfare. Sub-clause (i) of clause (e) of sub-section (1) of the said section provides for deduction of any amount of contribution received by the assesee being an employer from an employee to which the provisions of section 2(49)(o) apply, if such amount is credited by the assessee to the account of the employee in the relevant fund or funds by the due date. Sub-clause (ii) of clause (e) of sub-section (1) of the said section provides that “due date” means the date by which the assessee is required as an employer to credit employee contribution to the account of an employee in the relevant fund under any Act, rule, order or notification issued under it or under any standing order, award, contract of service or otherwise. It is proposed to substitute the said clause so as to provide that due date for the purposes of the said section shall be on or before the due date of filing of return of income under section 263(1) for the assessee. This amendment will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-2027 and subsequent years. Extract of Relevant Amendment Proposed by Finance Bill, 2026 31. Amendment of section 29. In section 29 of the Income-tax Act, in sub-section (1), for clause (e), the following clause shall be substituted, namely:— “(e) the amount of contribution received from an employee to which the provisions of section 2(49)(o) apply, if it is credited by the assessee to the account of the employee in the relevant fund or funds, on or before the due date of filing of return of income under section 263(1) for the tax year.”. Finance Bill 2026 Section 29 Amendment

Read more at: https://taxguru.in/income-tax/employee-contribution-pf-esic-allowable-paid-itr-due-date.html
Copyright © Taxguru.in