New Delhi: The government said the employers who delay the deposit of workers' share of social security contributions like employees' provident fund will not be able to claim the amount as deduction from their income.
An amendment in this regard is proposed in the Finance Bill 2021, to ensure that firms deposit the social security contributions of their employees like Employees' State Insurance (ESI) well in time.
Besides, it is proposed to tax interest earned on annual provident fund contribution of over Rs 2.5 lakh from April 1, 2021.
At present, there is no tax on interest earned on provident fund deposits.
In her budget speech, Finance Minister Nirmala Sitharaman said in Lok Sabha, "We have noticed that some employers deduct the contribution of employees towards Provident funds, superannuation funds, and other social security funds but do not deposit these contributions within the specified time."
She was of the view that for the employees, this means a loss of interest or income.
In cases where an employer later becomes financially unviable, non-deposit results in a permanent loss for the employees.
The minister told the House, "In order to ensure that employees' contributions are deposited on time, I reiterate that the late deposit of employees' contribution by the employer will not be allowed as deduction to the employer".
These amendments will take effect from April 1, 2021 and will accordingly apply to the assessment year 2021-22, and subsequent assessment years as per the Finance Bill 2021.