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The finance analyst at an Indian mid-market company opens the tax audit draft returned by the CA. Form 3CD Clause 20(b) — details of contributions received from employees for various funds as referred to in Section 36(1)(va) — shows a Rs 4.2 lakh disallowance for the previous year on employee PF and ESI contributions. The payroll data shows the July wage period contribution was deducted from employee wages on 31 July and deposited to EPFO on 16 August — a single day past the Paragraph 38 fifteenth cliff. The AP head recalls that the bank NEFT cutoff had passed on the fifteenth after a delayed payroll release from the parent company. The CFO asks whether the disallowance can be argued down at the assessment stage, whether a fresh deposit remedies it, or whether the tax audit report is now committing the company to a Rs 4.2 lakh addition to income with the associated Rs 1.05 to Rs 1.26 lakh corporate tax hit at the Section 115BAA 25 per cent rate plus Section 234B and Section 234C interest exposure. The answer sits at the intersection of Section 36(1)(va), Section 43B(b), the Finance Act 2021 Explanation 2 codification, the Supreme Court's Checkmate Services 2022 ruling, and the separate EPFO Section 14B and Section 7Q damages-and-interest levy on the same delayed deposit.
Section 43B(b) of the Income-tax Act 1961 governs the employer's own contribution to a provident, superannuation, gratuity, or any welfare fund. The deduction is available in the previous year in which the sum is actually paid; the first proviso allows the deduction in the accrual year if the sum is paid on or before the Section 139(1) return-filing due date. Section 36(1)(va) governs the employee's contribution — the amount deducted from the employee's wages that the employer holds in trust before remitting to the fund. Section 2(24)(x) treats the deducted employee contribution as income of the employer at the moment of deduction. Section 36(1)(va) then allows a deduction of the same amount only if credited to the employee's account in the relevant fund on or before the due date under the respective Act. Explanation 1 defines due date as the date by which the employer is required to credit the fund under any Act. Explanation 2 (Finance Act 2021, effective 1 April 2021) clarifies that Section 43B does not apply for determining this due date. The Supreme Court in Checkmate Services Private Limited v CIT-I (2022) 448 ITR 518 held the distinction between employer and employee contribution is real and substantive, and the respective-Act due date for employee contributions is a strict cliff. Paragraph 38 of the EPF Scheme 1952 fixes the EPFO due date at the fifteenth of the month following the wage period; the harmonised ESIC due date under Regulation 31 of the ESI General Regulations 1950 is the same fifteenth. A deposit on the sixteenth is one day past the cliff and the deduction is permanently lost — no curative filing, no proviso, no fresh deposit reopens it.
A payroll-to-EPFO/ESIC deposit calendar that runs the challan generation and NEFT initiation against the tenth or twelfth of the month, not the fifteenth. A documented buffer that carries the payroll release, the challan generation, the NEFT initiation, and the fund credit confirmation as four separate stages with named owners. A weekly reconciliation between the deducted-employee-contribution ledger (which posts on the wage-period payroll date), the challan-generated register (which posts on the challan creation date), and the EPFO/ESIC bank-credit confirmation register (which posts on the fund credit date). A Form 3CD Clause 20(b) working paper maintained through the year so the tax audit walkthrough in August of the AY documents every month's deposit date against the respective-Act cliff. An escalation protocol where a deposit slippage past the twelfth triggers same-day CFO notification, a written NEFT priority handling request to the corporate banking desk, and (in extremis) a same-day RTGS route rather than a next-day-clear NEFT. Separately, an EPFO Section 14B and Section 7Q levy tracker so the damages-and-interest exposure on any historical slippage is closed on the EPFO side while the IT-side disallowance is documented on the tax audit.
Every month's employee PF and ESI contribution is deposited by the tenth of the following month, well inside the Paragraph 38 fifteenth cliff. The Form 3CD Clause 20(b) disclosure at year-end shows every wage period's contribution against the deposit date against the respective-Act due date, with no disallowance to add back in the computation. The Section 36(1)(va) deduction is preserved on the full year's employee-contribution ledger. The historical Rs 4.2 lakh disallowance from the earlier year is documented as a one-time crystallised event with the correct add-back, the corresponding EPFO Section 14B damages settled on the arrears amount, and the Section 7Q interest closed on the two-day-late deposit. The tax audit report is defensible, the Section 271AAC exposure is contained, and the payroll-to-deposit calendar has been re-tempered to run against the tenth rather than the fifteenth so the risk of a repeat next year is eliminated by design rather than by monthly heroics.
The tax audit draft comes back from the CA with a Rs 4.2 lakh disallowance under Form 3CD Clause 20(b) — employee provident fund and employees’ state insurance contributions deposited late. You go back to the payroll register. The July wage-period deduction was made on 31 July, the challan was generated on the EPFO portal on the fifteenth of August, and the NEFT credited on the sixteenth because the bank cutoff had already passed. One day late.
The AP head’s first reaction is that a one-day delay cannot possibly be a permanent disallowance. Surely paying it before the return-filing date under Section 139(1) fixes it — that is what the Section 43B proviso is for. The CFO is not sure, and someone has to decide whether to fight the disallowance at assessment stage or accept the Rs 4.2 lakh add-back with the corresponding Rs 1.05 to Rs 1.26 lakh tax hit.
The quick answer
Employee PF and ESI contributions — the amount deducted from the employee’s wages and held by the employer in trust before deposit to the fund — are governed by Section 36(1)(va) of the Income-tax Act 1961, not Section 43B(b). The deduction is available only if the amount is credited to the employee’s account in the relevant fund on or before the due date under the respective Act (EPF or ESI), which is the fifteenth of the month following the wage period.
Explanation 2 to Section 36(1)(va), inserted by the Finance Act 2021 and effective from 1 April 2021, clarified that the Section 43B proviso — the route that lets you pay by the Section 139(1) return-filing date — does not apply and is deemed never to have applied to employee contributions. The Supreme Court settled the retrospective reading in Checkmate Services Private Limited v CIT-I (Civil Appeal No. 2833 of 2016, decided 12 October 2022). One-day late = permanent disallowance. There is no curative filing, no fresh deposit, no proviso that reopens the deduction.
The employer’s own contribution to the same funds — governed by Section 43B(a) or 43B(b), separately — remains curable up to the Section 139(1) return-filing due date. The two contributions look identical on the payroll register and travel through the same NEFT rail, but their tax treatment is fundamentally different.
Explanation 1 — Employee versus employer contribution: two different sections
The single most common confusion behind the disallowance is treating the PF/ESI deposit as one line item. It is two.
The employer’s own contribution (12 per cent of basic + DA for PF, and 3.25 per cent for ESI, under the current schedules) is the employer’s primary statutory liability. It falls under Section 43B(b) for provident and welfare funds — the deduction is available in the year of actual payment, and the first proviso lets you take the deduction in the accrual year if paid on or before the Section 139(1) return-filing date (30 September of the assessment year, extended to 31 October for TP-covered assessees). A five-month-late deposit paid on 25 September of the AY still gets the deduction for the previous year.
The employee’s contribution (12 per cent of basic + DA for PF, and 0.75 per cent for ESI, deducted from the employee’s wages) is money the employer holds in trust — Section 2(24)(x) treats it as the employer’s income at the moment of deduction, and Section 36(1)(va) allows a matching deduction only if the amount is credited to the employee’s account in the relevant fund by the respective-Act due date. Explanation 1 to Section 36(1)(va) defines the respective-Act due date as the date under any Act, rule, or notification — the Paragraph 38 EPF Scheme 1952 fifteenth cliff, and the Regulation 31 ESI General Regulations 1950 fifteenth cliff.
The single Form 3CD Clause 20(b) row of Rs 4.2 lakh in your working paper is exclusively the employee contribution — the deducted portion. The employer’s own contribution goes on Clause 26 as the Section 43B disclosure and is (in the illustrative one-day-late case) curable.
Explanation 2 — Checkmate Services 2022 settled the retrospective reading
Before October 2022, several High Courts had held both ways on whether the Section 43B(b) return-filing-date proviso extended to Section 36(1)(va) employee contributions. Some courts read the two provisions harmoniously and allowed the deduction on payment up to the Section 139(1) date. Others held the two provisions were mutually exclusive and applied the strict respective-Act cliff.
The Supreme Court’s decision in Checkmate Services Private Limited v CIT-I settled the question in one direction. The Court held the distinction between an employer’s contribution — the employer’s own primary statutory liability — and the employee’s contribution — money deducted from wages and held in trust — is real and substantive. Section 43B applies to the former; Section 36(1)(va) applies to the latter with its own strict due-date test. The Court described Section 43B as never having applied to Section 36(1)(va), aligning with the retrospective effect the Finance Act 2021 Explanation 2 had already codified.
This is not a prospective ruling. Employers who took the Section 43B(b) route for late-deposited employee contributions in earlier years are exposed to reopening under Section 148 within the three-year limit (or ten-year limit for larger escaped-income cases under Section 149), and to Section 154 rectification where an assessment is still open or in appeal.
Explanation 3 — What counts as payment on the fifteenth
Paragraph 38 of the EPF Scheme 1952 requires the employer to pay the fund within fifteen days of the close of the wage month. For a July wage-period deduction, the deposit must reach EPFO by 15 August. For August wages, by 15 September. The ESIC due date under Regulation 31 (as harmonised) works the same way.
The fifteenth is not the challan-generation date, not the NEFT initiation date, and not the debit from the employer’s bank account. It is the credit to the EPFO or ESIC account. A challan generated at 5 pm on the fifteenth followed by an NEFT that clears on the sixteenth is a sixteenth-deposited contribution. The AP head who runs the deposit on the fifteenth against a same-day cutoff is operating with zero buffer for a bank-side rail delay, a payroll release slip from the parent company, or a public holiday that falls on the fourteenth.
The operational fix is a target deposit date of the tenth or the twelfth of the following month, with a documented five-day buffer between the deducted-contribution ledger post and the EPFO fund-credit confirmation. The NACH mandate management reconciliation sits alongside this discipline for the payment-rails view — a NACH deposit initiated on the fifteenth with a next-day fund credit is a Section 36(1)(va) disallowance, regardless of the mandate’s technical settlement window.
Explanation 4 — The disallowance arithmetic on the illustrative Rs 4.2 lakh
Take the July wage period Rs 4.2 lakh employee PF and ESI deducted, deposited on 16 August rather than 15 August. The direct tax consequence at the Section 115BAA 25 per cent concessional corporate rate is Rs 1.05 lakh (plus 10 per cent surcharge and 4 per cent cess on the surcharged tax — call it Rs 1.20 lakh headline). At the older 30 per cent standard corporate rate the figure is Rs 1.26 lakh (plus surcharge and cess).
Layered on top: Section 234B interest at 1 per cent per month on the advance-tax shortfall attributable to the disallowance, from April of the assessment year to the self-assessment tax payment date. Section 234C interest at 1 per cent per month on the quarterly instalment shortfalls for the four advance-tax instalments (15 June, 15 September, 15 December, 15 March). For an assessee who paid a return-filing self-assessment tax on 30 September of the AY, the Section 234B window is April through September — five months at 1 per cent monthly — so roughly Rs 6,000 of interest on the Rs 1.20 lakh tax shortfall alone.
Section 271AAC penalty at 10 per cent of the tax payable can attach where the addition falls within the unexplained-income sections (Sections 68 to 69D) — the citation is fact-specific and not automatic, but the assessment order should be reviewed for it. The tax audit Form 3CD reconciliation walkthrough covers the Clause 20(b) disclosure treatment and the ancillary Form 3CD clauses that surface the same delayed-deposit pattern from other angles (Clause 26 for the Section 43B disclosure, Clause 20(a) for the employer’s own contribution).
Explanation 5 — The parallel EPFO Section 14B and Section 7Q hit
Independent of the Income-tax Act disallowance, the same delayed deposit triggers a levy under the Employees’ Provident Funds and Miscellaneous Provisions Act 1952. Section 14B empowers the Central Provident Fund Commissioner to recover damages on the arrears amount — the current scale is 5 per cent per annum for a delay under two months, 10 per cent per annum for two to four months, 15 per cent per annum for four to six months, and 25 per cent per annum for six months and above. Section 7Q levies simple interest at 12 per cent per annum from the due date to the actual deposit date.
On the illustrative one-day slippage, the EPFO damages figure is negligible in rupee terms (5 per cent per annum on a one-day window). On the illustrative six-months-late deposit, the picture is very different — Rs 4.2 lakh × 25 per cent per annum for six months = Rs 52,500 in EPFO damages, plus Rs 4.2 lakh × 12 per cent per annum for six months = Rs 25,200 in Section 7Q interest, on top of the Rs 1.20 lakh income-tax hit. The EPFO exposure is closable by paying the arrears together with the Section 14B damages and the Section 7Q interest. The income-tax disallowance is not closable.
The escalation to run first — reverse the calendar
For every open previous year in the assessment cycle, extract the payroll register against the EPFO and ESIC fund-credit confirmations. Any wage period where the fund credit landed on the sixteenth or later is a Section 36(1)(va) disallowance. Group by AY and by month. Reconcile against the Form 3CD Clause 20(b) figure the CA has proposed — sometimes the CA has captured only part of the delayed set (missed a September-October wage-cycle deposit against a payroll slippage), and the true add-back is larger than the tax audit currently discloses.
The PF and ESI statutory payment reconciliation walkthrough is the deeper monthly-close treatment — the reconciliation between the payroll deduction ledger, the ECR (electronic challan-cum-return) upload to EPFO, and the fund-credit confirmation from the corporate banking desk. Running this reconciliation monthly rather than annually at tax-audit time is what surfaces the slippage on the sixteenth of August in the third week of August rather than in August of the following year when the audit walkthrough begins. The sibling Section 43B(h) MSME 45-day rule walkthrough covers the related Section 43B family clause that shares the strict-cliff mechanics, and the companion Section 40A(3) cash-payment walkthrough covers the parallel Chapter IV-D disallowance for cash payments above the threshold.
When the manual working paper stops holding
A small Indian company with a single payroll cycle, a single EPFO code, a single ESIC code, and fewer than fifty employees can run the PF/ESI deposit against a one-line spreadsheet — wage period, deducted amount, challan generation date, fund credit date, versus-fifteenth flag. The AP head reviews it monthly and the discipline holds.
A mid-market company with multi-state operations (multiple ESIC codes because ESI dispensary catchments are state-specific), a contractor-workforce leg (where the principal employer’s PF/ESI compliance obligation runs alongside the contractor’s own liability under the CLRA), a two-week payroll cycle bunched with month-end release from the parent company, and a mix of on-roll and off-roll payments (where the Section 36(1)(va) test applies to the on-roll payroll only) is running a rolling reconciliation across roughly a dozen ECR uploads and fund-credit confirmations every month. The exposure is not a single wage period’s slippage — it is the compounding of one-day and two-day slippages across the year that surface as an aggregate seven-figure Form 3CD Clause 20(b) disallowance at tax audit time.
At that scale, moving the payroll-to-deposit calendar and the ECR-to-fund-credit reconciliation onto continuously refreshed detection — where Terra Insight’s reconciliation software for India treats the Section 36(1)(va) fifteenth-cliff exception queue and the parallel EPFO Section 14B and Section 7Q levy tracker as first-class monthly outputs rather than an August-and-September retrofit — is what keeps the tax audit clean and the corporate tax charge free of Rs 4.2 lakh six-figure disallowances that were entirely avoidable at the wage-period-plus-ten-days deposit date. Below that scale, the one-page ledger plus the through-the-year discipline is the right tool and running the reconciliation by hand is what builds the reconciler’s judgement for when scale demands the shift.
Go deeper
- PF and ESI statutory payment reconciliation — the monthly-close walkthrough
- Tax audit Form 3CD reconciliation — the Clause 20(b) and Clause 26 treatment
- NACH mandate management reconciliation — the payment-rails companion
- What is Section 43B(h) MSME 45-day rule — the Section 43B family sibling
- Why cannot I accept cash above Rs 20,000 from a customer — the Section 40A companion disallowance
- Reconciliation software for India
Frequently Asked Questions
What is the difference between employee PF/ESI contribution and employer contribution for tax deduction purposes?
The employer’s own contribution to PF, ESI, superannuation, or gratuity is governed by Section 43B(b) of the Income-tax Act 1961. The deduction is available in the previous year in which the amount is actually paid, and the first proviso to Section 43B allows the deduction in the previous year of accrual if the sum is paid on or before the Section 139(1) return-filing due date for that year (30 September of the assessment year, or 31 October where the assessee is TP-covered). The employee’s contribution — the amount deducted from the employee’s wages before payment and remitted by the employer to the fund — is governed by Section 36(1)(va). The deduction is available only if the sum is credited to the employee’s account in the relevant fund on or before the due date under the respective Act (EPF or ESI) — the fifteenth of the month following the wage period. Explanation 2 to Section 36(1)(va), inserted by the Finance Act 2021, clarified that Section 43B does not apply for determining this due date. The Supreme Court’s Checkmate Services 2022 ruling confirmed the strict reading. One-day delay on the employee contribution is a permanent disallowance; delay on the employer contribution up to the Section 139(1) date is curable.
The Supreme Court Checkmate Services ruling — does it apply to earlier years too?
Yes. The Supreme Court decision in Checkmate Services Private Limited v CIT-I (Civil Appeal No. 2833 of 2016, decided 12 October 2022, reported (2022) 448 ITR 518) is a settled interpretation of Section 36(1)(va) and Section 43B as they have stood since the Section was first enacted. The Court’s holding is declaratory — it clarifies what the law has always meant rather than changing it prospectively. Employers who claimed the Section 43B(b) route for late-deposited employee contributions in earlier assessment years are exposed to reopening under Section 148 within the time limits (three years or ten years, depending on the amount of escaped income under Section 149), and to Section 154 rectification where the disallowance was contested at the appellate stage and the appeal is now pending or fresh. Several High Courts had previously held both ways on this question; the Supreme Court settled it in one direction and made the retrospective effect explicit by describing Section 43B as never having applied to Section 36(1)(va).
The EPF challan was created on the 15th but the bank cleared it on the 16th. Is that disallowed?
The due date under Paragraph 38 of the EPF Scheme 1952 is the fifteenth of the month following the wage period. What counts as payment on the fifteenth for Section 36(1)(va) purposes is the actual credit to the EPFO account, not the challan generation on the employer’s portal or the debit from the employer’s bank account. A challan created on the 15th at 6 pm but cleared to EPFO on the 16th because the NEFT cutoff had already passed is a 16th-deposited contribution — outside the fifteenth cliff and disallowed under Section 36(1)(va) read with Checkmate Services. The operational fix is to run the EPFO deposit against the tenth or the twelfth of the month with a documented buffer for NEFT rails, bank holidays, and month-end payroll bunching. The AP head who runs the deposit on the fifteenth against a same-day NEFT cutoff is running a zero-buffer control that fails on any single bank-side delay.
What is the penalty on the disallowance beyond the tax itself?
Four separate layers. First, the direct tax on the added-back amount at the corporate rate (25 per cent for most Indian companies under Section 115BAA, or 22 per cent for concessional-rate opters, plus applicable surcharge and cess). On the illustrative Rs 4.2 lakh disallowance, that is roughly Rs 1.05 lakh to Rs 1.26 lakh. Second, Section 234B interest at 1 per cent per month on the shortfall of advance tax attributable to the disallowance, running from April of the AY to the date of self-assessment tax payment. Third, Section 234C interest at 1 per cent per month on the quarterly instalment shortfall for each of the four advance-tax instalments in the previous year (15 June, 15 September, 15 December, 15 March). Fourth, exposure to Section 271AAC penalty at 10 per cent of the tax payable where the addition qualifies as unexplained under Sections 68 to 69D — this is fact-specific and does not attach automatically to every Section 36(1)(va) disallowance, but the AO’s assessment order should be reviewed for the citation. Separately from the Income-tax Act layer, the EPFO Section 14B damages (5 to 25 per cent per annum by delay bucket) and Section 7Q interest (12 per cent per annum simple) apply to the same delayed deposit.
What is the difference between EPFO Section 14B/7Q and the IT Act Section 43B(b) disallowance?
Two different statutes, two different consequences on the same delayed deposit. The Employees’ Provident Funds and Miscellaneous Provisions Act 1952 imposes damages under Section 14B (recovered by the Central Provident Fund Commissioner on the arrears amount, on a scale of 5 to 25 per cent per annum by delay bucket) and interest under Section 7Q (simple interest at 12 per cent per annum from the due date to the actual deposit date). The Income-tax Act 1961 imposes the Section 43B(b) read with Section 36(1)(va) disallowance in the computation of business income — the delayed contribution is added back and taxed at the applicable corporate rate. A single one-day-late deposit of Rs 4.2 lakh triggers both — a small EPFO damages figure (5 per cent per annum on a two-day-late window is negligible in rupee terms) and a large IT disallowance of the full Rs 4.2 lakh into taxable income. The EPFO exposure is closable by paying the arrears with the Section 14B/7Q levies; the IT disallowance is not closable — it is permanent.
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- ▸ Section 36(1)(va), Income-tax Act 1961 — Any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of Section 2 apply, if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date. Explanation 1 defines due date as the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order, or notification issued thereunder or under any standing order, award, contract of service, or otherwise. Explanation 2 (inserted by the Finance Act 2021, effective 1 April 2021) clarifies that the provisions of Section 43B shall not apply and shall be deemed never to have applied for the purposes of determining the due date under this clause. The Explanation 2 insertion codified a strict-reading position — the Section 43B(b) proviso allowing payment up to the Section 139(1) return-filing date is not available for employee contributions, which are governed by the respective-Act due date instead.
- ▸ Section 43B(b), Income-tax Act 1961 — Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him. The first proviso allows the deduction where the sum is actually paid on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of Section 139 in respect of the previous year in which the liability to pay such sum was incurred and the evidence of such payment is furnished by the assessee along with such return. This route — pay by the Section 139(1) return-filing date — is available for the employer's own contribution under Section 43B(a) but is not available for the employee contribution under Section 36(1)(va) after the Finance Act 2021 Explanation 2 clarified the position.
- ▸ Checkmate Services Private Limited v Commissioner of Income Tax-I, (2022) 448 ITR 518 (SC) — The Supreme Court of India (Civil Appeal No. 2833 of 2016, decided 12 October 2022) held that the distinction between an employer's contribution — which is its own primary liability under law under Section 36(1)(iv) — and the employee's contribution which the employer merely holds in trust after deduction under Section 36(1)(va) is real and substantive. The Court ruled that Section 43B does not cover Section 36(1)(va) employee contributions, and the due date under the respective Act (EPF or ESI) is a strict statutory cliff. An employer that deposits the deducted employee contribution even one day after the respective-Act due date loses the Section 36(1)(va) deduction permanently — the amount is treated as income of the employer for the year under Section 2(24)(x), added back in the computation, and no proviso, curative filing, or subsequent late deposit reopens the deduction.
- ▸ Paragraph 38, Employees' Provident Funds Scheme 1952 — The employer shall, before paying the member his wages in respect of any period or part of period for which contributions are payable, deduct the employee's contribution from his wages which together with his own contribution as well as an administrative charge of such percentage of the pay as the Central Government may fix, he shall within fifteen days of the close of every month pay the same to the Fund by separate bank drafts or cheques on account of contributions and administrative charge. The fifteen-days-of-close-of-month rule fixes the EPFO due date for the deducted employee contribution at the fifteenth of the following month — a July wage-period deduction has an EPFO deposit due date of 15 August. This is the due date under the respective Act referenced in Section 36(1)(va) Explanation 1, and it is the strict cliff clarified by Checkmate Services 2022.
- ▸ Regulation 31, Employees' State Insurance (General) Regulations 1950 — An employer shall pay the contribution in respect of every employee, whether employed by him directly or by or through an immediate employer, and the employer's contribution and the employee's contribution shall be paid to the Corporation within twenty-one days of the last day of the calendar month in which the contributions fall due. A subsequent notification harmonised the ESIC due date to fifteen days from the close of the wage month, in alignment with the EPFO fifteenth cliff — a July wage-period ESIC contribution has a deposit due date of 15 August. The ESIC due date is the due date under the respective Act for Section 36(1)(va) purposes on ESI contributions.
- ▸ Section 14B and Section 7Q, Employees' Provident Funds and Miscellaneous Provisions Act 1952 — Section 14B empowers the Central Provident Fund Commissioner to recover from the employer, by way of penalty, damages not exceeding the amount of arrears — the current scale is 5 per cent per annum for a delay of less than 2 months, 10 per cent for 2 to 4 months, 15 per cent for 4 to 6 months, and 25 per cent per annum for a delay of 6 months and above. Section 7Q levies simple interest at 12 per cent per annum on the arrears from the date on which the amount became due till the date of actual payment. The EPFO Section 14B damages plus Section 7Q interest levy is separate from and additional to the income-tax disallowance under Section 43B(b) read with Section 36(1)(va) — the two exposures compound on the same delayed deposit.