Employer pension contribution deduction allowed up to a salary-linked ceiling under the income tax regime.

Employer's contribution towards an employee pension scheme is deductible in computing business income, subject to a salary-linked ceiling. The current provision allows deduction up to 14% of salary for contributions to the pension scheme referred to in section 124, with salary including dearness allowance only where the terms of employment so provide and excluding other allowances and perquisites. A general prohibition also disallows employer payments to funds or similar institutions, except where covered by the specified deduction clauses or required by law.

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