Comparison of Section 29 "Deductions related to employee welfare" between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

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....ductible. A principal change appears in the treatment and interaction of provisions relating to gratuity provisions (sub-clause (d)) and the general prohibition on deductions for provisions (sub-section (2)). The effective date or decision date: "Income-tax Act, 2025 [As Passed]" indicates enactment, but the text contains no express effective date beyond being part of the Act. (If a detail is missing: Not stated in the document.) Background & Scope Statutory hooks: Provisions are placed under the head "Profits and gains of business or profession" and are framed as Clause/Section 29 of the Income-tax Bill/Act, 2025. Coverage: deductions allowed to an assessee who is an employer when computing income chargeable u/s 26. The text sets out spe....

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....ear. * (1)(e): Employee contributions falling within section 2(49)(o) if credited to the employee's account in the relevant fund by the "due date"; "due date" is defined by reference to statutory, contractual or other obligations and the provisions of section 37 shall not be applied to determine the due date under this clause. Sub-section (2) provides a general bar on deductions for "provision made for the payment of gratuity to the employees on their retirement or termination for any reason" but - in the As Passed text - is expressly made subject to (1)(d). Sub-section (2)(b) forbids double deduction: if a deduction under (1)(d) has been allowed for a provision, no deduction is allowed on actual payments made from such provision. I....

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....ion. Illustrations * Example 1: An employer credits employee contributions to the recognised provident fund on the date required by statute. Under (1)(e), such credited employee contributions are deductible for the employer provided the crediting is done by the defined "due date." (Details of the statutory due date or record-keeping requirements: Not stated in the document.) * Example 2: An employer establishes an approved gratuity fund under an irrevocable trust and makes a provision during the tax year to meet a gratuity payment that has already become payable during that tax year. Under (1)(d) (as enacted), that provision is deductible "irrespective of" the general bar in (2). If the employer later disburses amounts from that provis....

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....de for the payment of gratuity to the employees on their retirement or termination for any reason;" As Passed: "(a) Subject to the provisions of sub-section (1)(d), no deduction shall be allowed for any provision made for the payment of gratuity to the employees on their retirement or termination for any reason;" * Net practical impact (as shown by the text): In the Old Version there is textual tension - (1)(d) permits "any provision made for the purpose of making contribution towards approved gratuity fund or for the purpose of payment of any gratuity that has become payable during the tax year" while (2)(a) appears to say for the purposes of (1)(d) no deduction shall be allowed for provisions made for gratuity on retirement/termination.....

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....alary" (inclusion of dearness allowance only if terms of employment so provide; exclusion of other allowances) create a compliance threshold; documents or employment terms evidencing inclusion of dearness allowance will be material (specific record requirements: Not stated in the document). * The As Passed clarification around (1)(d)/(2)(a) reduces ambiguity about whether provisions for gratuity may be deductible: certain provisions and payments that have become payable during the tax year fall within deductible categories despite the general prohibition-employers must track whether a deduction has already been taken on a provision to avoid double deduction on actual payment (sub-section (2)(b)). * Record-keeping/evidence: Employers sho....