The new rule will set the due date of depositing the employee contribution as the last date for filing the ITR under Section 263(1) of the Income Tax Act.
Nidhi | Feb 1, 2026 |
Big Relief for Employers in Budget 2026: Deadline Extension for Employee Contribution Deposit
In the Union Budget 2026, the Union Finance Minister, Smt Nirmala Sitharaman, has announced a new rule for employers. As per this new rule, employers can claim deductions towards the employee welfare contributions if they are deposited on or before the due date for filing the income tax return (ITR).
The employee welfare contribution includes EPF (Employee Provident Fund), ESI (Employees’ State Insurance), and more. The deduction toward such a contribution is covered under section 29 of the Income Tax Act.
Currently, employers can claim a deduction toward the welfare contribution only if they deposit the money by the statutory due date. So if an employer fails to deposit the employee contributions before the specified due date, it results in permanent disallowance.
However, the new rule will set the due date of depositing the employee contribution as the last date for filing the ITR under Section 263(1) of the Income Tax Act, giving more time to make deposits and avail the tax benefit.
This change will be effective from April 1, 2026, for the tax year 2026-27 and subsequent years.
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