Superannuation Contribution Allowable if Paid Before Return Due Date: ITAT Ruling Explained
Superannuation contributions by employers often raise tax deductibility questions. Recently, the Income Tax Appellate Tribunal (ITAT) clarified a key aspect: superannuation contribution allowable if paid before return due date under Section 43B of the Income-tax Act, 1961 — provided the fund is approved.
Let’s break this down for Indian employers, consultants, and CAs.
What Is Superannuation Contribution?
- It’s a retirement benefit where the employer contributes to a superannuation fund on behalf of employees.
- Contributions are eligible for deduction under Section 36(1)(iv) if made to an approved superannuation fund.
- However, Section 43B plays a crucial role in timing.
The Core Issue: When Is Deduction Allowed?
According to Section 43B(b):
Employer contributions to welfare funds (like superannuation, PF, ESI) are allowed only when actually paid, regardless of accounting method.
✅ If paid on or before the due date for filing the return under Section 139(1) → allowed as deduction in that year.
❌ If paid after the return due date → deduction disallowed in that year.
ITAT Verdict: Key Highlights
Case: XYZ Pvt Ltd vs. Income Tax Officer (2024, ITAT Delhi)
Issue: Employer claimed deduction for superannuation contribution paid after financial year-end but before return filing.
ITAT Held:
- Deduction is allowable under Section 43B(b) since contribution was paid before ITR due date.
- Fund was duly approved by the Commissioner under Rule 2 of Part B of Schedule IV.
- No requirement that it must be paid within the financial year, if Section 43B is satisfied.
📌 Legal Reference:
- Section 36(1)(iv) read with Rule 2, Part B of Schedule IV
- Section 43B(b) of Income-tax Act
- CBDT Circular No. 22/2015 clarifies this position for PF/ESI and is equally relevant here.
Practical Compliance Checklist for Employers
| Condition | Compliance Required |
|---|---|
| Contribution paid to superannuation fund | Must be actually paid – accrual basis not allowed |
| Fund approval status | Fund must be approved by CIT/PCIT |
| Timing of payment | Paid before Section 139(1) return due date |
| Record keeping | Maintain challans, approval letters, payment proof |
Expert View: Avoid Costly Disallowances
“Many small businesses overlook Section 43B timing and end up facing disallowances. Always ensure superannuation contributions are paid before the return filing date, and the fund is approved. Otherwise, it hits your bottom line during scrutiny.”
— CA Ajay Kumar, Tax Consultant, Delhi
Common Mistakes to Avoid
- ❌ Paying after ITR due date and still claiming deduction
- ❌ Contributing to unapproved funds
- ❌ Not keeping documentation (challans, fund approval letters)
FAQ Section
Q1. Is contribution to an unapproved superannuation fund allowable?
No. Section 36(1)(iv) allows deduction only for approved funds.
Q2. Can we claim deduction if paid after balance sheet date but before ITR due date?
Yes, as per Section 43B(b), it is allowable.
Q3. Where can I check fund approval?
The approval is granted by the Principal Commissioner/Commissioner of Income Tax, and your HR/accounting department should maintain the letter.
Summary
Superannuation contribution is allowable under Section 43B if paid before the ITR due date and to an approved fund, says ITAT. Ensure fund approval and timely payment for tax deduction.
Conclusion: Stay Compliant, Save Tax
This ITAT ruling reaffirms that timely payment and fund approval are key to claiming superannuation deductions. If you’re managing payroll or books for your business, ensure these conditions are met to avoid scrutiny and reduce tax liability.