EMPLOYER PAID EMPLOYEES CONTRIBUTION OF EPF & TREATED THEM AS STAFF WELFARE

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A company is paying both employer and employee EPF contributions, treating the employee's portion as staff welfare. This is not the correct accounting method. While the employer's contribution is an allowable expense, the employee's contribution paid by the employer should ideally be recovered from the employee's salary to avoid discrepancies in tax filings and potential issues with income reporting.

Dibyendu Majumder

Dibyendu Majumder (Querist)
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04 January 2024 One developer company pays staff salaries without deducting the EPF contribution from employees. The company pays both employer & employee contributions from their bank account & shows employees' contributions which are actually paid by the employer as staff welfare in books of accounts. If this method is correct? please clarify urgently.

RAJA P M

RAJA P M (Expert)
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05 January 2024 It's not correct. But, If the employer will pay the contribution then it will be added to the cost of salary in employee account...

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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20 January 2024 As per me, we will have a difference in net salary credited to the bank as per the bank statement vs Form 16/Form 26AS for the year which can create problems in ITR filling. The AO may take this as an underreporting of income. The employer should recover such contribution from subsequent salary to NULLIFY the impact during the year.

Thiyagarajan Kandasamy

Thiyagarajan Kandasamy (Expert)
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18 November 2025 No this method is not correct, Only Employer contribution is eligible for Expenses deductions and Employee contribution paid by the Employer in hands of company means, its liable to deduct the Employee part in thier salary.

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