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CS Executive · Tax Laws and Practice · Classification and Tax Incidence on Companies

Under the Income-tax Act, 2025 (applicable from the June 2027 session), Mr. Rohan, a salaried individual, works for a private company that contributes to his account under a pension scheme notified by the Central Government. His total income is chargeable to tax under the regime in section 202(1). What is the maximum employer contribution, as a percentage of salary, that is deductible under section 124?

The limit is 14% of salary. Ordinarily a private employer's contribution is deductible up to 10%, but where the assessee's total income is chargeable to tax under section 202(1), section 124(2) substitutes 14% for 10%.

  1. A10%
  2. B12%
  3. C14%Correct
  4. D20%

Explanation

Section 124(1)(b) gives a 10% limit for employers other than the Central or State Government. Section 124(2) says that where total income is chargeable to tax under section 202(1), the 10% is replaced by 14%. The 10% option ignores sub-section (2).

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