THE FOURTH SCHEDULE
PART A
RECOGNISED PROVIDENT FUNDS[1]
[See sections 2(38), 10(12), 10(25),
36(1)(iv), 87(1)(d)[2] , 111, 192(4)]
1.
Application of Part:-
This Part shall not apply
to any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies.
2.
Definitions:-
In this Part, unless the
context otherwise requires,—
(a) "Employer" means any person who
maintains a provident fund for the benefit of his or its employees, being—
(i) A Hindu undivided
family, company, firm or other association of persons, or
(ii) An individual
engaged in a business or profession the profits and gains whereof are
assessable to income-tax under the head "Profits and gains of business or
profession";
(b)
"Employee" means an employee participating in a provident fund, but
does not include a personal or domestic servant;
(c)
"Contribution" means any sum credited by or on behalf of any employee
out of his salary, or by an employer out of his own moneys, to the individual
account of an employee, but does not include any sum credited as interest;
(d)
"Balance to the credit of an employee" means the total amount to the
credit of his individual account in a provident fund at any time;
(e)
"Annual accretion", in relation to the balance to the credit of an
employee, means the increase to such balance in any year, arising from
contributions and interest;
(f)
"Accumulated balance due to an employee" means the balance to his
credit, or such portion thereof as may be claimable by him under the
regulations of the fund, on the day he ceases to be an employee of the employer
maintaining the fund;
(g)
"Regulations of a fund" means the special body of regulations
governing the constitution and administration of a particular provident fund;
and
(h)
"Salary" includes dearness allowance, if the terms of employment so
provide, but excludes all other allowances and perquisites.
3.
According and withdrawal of recognition:-
(1) The [3] [Chief Commissioner or Commissioner] may accord recognition
to any provident fund which, in his opinion, satisfies the conditions
prescribed in rule 4 and the rules made by the Board in this behalf, and may,
at any time, withdraw such recognition if, in his opinion, the provident fund
contravenes any of those conditions:
[4] [Provided that
in a case where recognition has been accorded to any provident fund on or
before the 31st day of March, 2006 and such provident fund does not satisfy the
conditions set out in clause (ea) of rule 4, the recognition to such
fund shall be withdrawn, if such fund does not satisfy, on or before the 31st
day of March, [5] [2009], the conditions set out in the said clause
and any other condition which the Board may, by rules specify, in this behalf:]
[6] [Provided
further that nothing contained in the first proviso shall apply to the
provident fund of an establishment in respect of which a notification has been
issued by the Central Government under sub-section (2) of section 16 of the
Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952).]
(2) An order according recognition shall
take effect on such date as the [7] [Chief Commissioner or Commissioner] may fix in accordance
with any rules the Board may make in this behalf, such date not being later
than the last day of the financial year in which the order is made.
(3) An order withdrawing recognition shall
take effect from the date on which it is made.
(4) An order according recognition to a
provident fund shall not, unless the[8] [Chief Commissioner or Commissioner] otherwise directs, be
affected by the fact that the fund is subsequently amalgamated with another
provident fund on the occurrence of an amalgamation of the undertakings in
connection with which the two funds are maintained, or that it subsequently
absorbs the whole or a part of another provident fund belonging to an
undertaking which is wholly or in part transferred to or merged in the
undertaking of the employer maintaining the first-mentioned fund.
4.
Conditions to be satisfied by recognized provident funds:-
In order that a provident
fund may receive and retain recognition, it shall subject to the provisions of rule
5, satisfy the conditions set out below and any other conditions which the
Board may, by rules, specify—
(a) All employees shall
be employed in
(b) The contributions of
an employee in any year shall be a definite proportion of his salary for that
year and shall be deducted by the employer from the employee's salary in that
proportion, at each periodical payment of such salary in that year, and
credited to the employee's individual account in the fund;
(c) The contributions of
an employer to the individual account of an employee in any year shall not
exceed the amount of the contributions of the employee in that year, and shall
be credited to the employee's individual account at intervals not exceeding one
year;
(d) The fund shall be
vested in two or more trustees or in the official trustee under a trust which
shall not be revocable, save with the consent of all the beneficiaries;
(e) The fund shall
consist of contributions as above specified, received by the trustees, of
accumulations thereof, and of interest credited in respect of such
contributions and accumulations, and of security-ties purchased therewith and
of any capital gains arising from the transfer of capital assets of the fund,
and of no other sums;
[9] [(ea) The
fund shall be a fund of an establishment to which the provisions of sub-section
(3) of section 1 of the Employees' Provident Funds and Miscellaneous Provisions
Act, 1952 (19 of 1952) apply or of an establishment which has been notified by
the Central Provident Fund Commissioner under sub-section (4) of section 1 of
the said Act, and such establishment shall obtain exemption under section 17 of
the said Act from the operation of all or any of the provisions of any scheme
referred to in that section;]
(f) The employer shall
not be entitled to recover any sum whatsoever from the fund, save in cases
where the employee is dismissed for misconduct or voluntarily leaves his
employment otherwise than on account of ill-health or other unavoidable cause
before the expiration of the term of service specified in this behalf in the
regulations of the fund:
Provided that in such
cases the recoveries made by the employer shall be limited to the contributions
made by him to the individual account of the employee, and to interest credited
in respect of such contributions in accordance with the regulations of the fund
and the accumulations thereof;
(g) The accumulated
balance due to an employee shall be payable on the day he ceases to be an
employee of the employer maintaining the fund;
(h) Save as provided in
clause (g) or in accordance with such conditions and restrictions as the
Board may, by rules, specify, no portion of the balance to the credit of an
employee shall be payable to him.
5.
Relaxation of conditions:-
(1) Notwithstanding anything contained in
clause (a) of rule 4, the [10] [Chief
Commissioner or Commissioner] may, if he thinks fit and subject to such
conditions, if any, as he thinks proper to attach to the recognition, accord
recognition to a fund maintained by an employer whose principal place of
business is not in India, provided the proportion of employees employed outside
India does not exceed ten per cent.
(2) Notwithstanding anything contained in
clause (b) of rule 4, an employee who retains his employment while
serving in the armed forces of the Union or when taken into or employed in the
national service under any law for the time being in force, may, whether he
receives from the employer any salary or not, contribute to the fund during his
service in the armed forces of the Union or while so taken into or employed in
the national service a sum not exceeding the amount he would have contributed
had he continued to serve the employer.
(3) Notwithstanding anything contained in
clause (e) or clause (g) of rule 4,—
(a) At the request made
in writing by the employee who ceases to be an employee of the employer maintaining
the fund, the trustees of the fund may consent to retain the whole or any part
of the accumulated balance due to the employee to be drawn by him at any time
on demand;
(b) Where the
accumulated balance due to an employee who has ceased to be an employee is
retained in the fund in accordance with the preceding clause, the fund may
consist also of interest in respect of such accumulated balance;
[11] [(c) the
fund may also consist of any amount transferred from the individual account of
an employee in any recognized provident fund maintained by his former employer
and the interest in respect thereof.]
(4)
Subject to any rules[12] which the Board may make in this behalf, the [13] [Chief
Commissioner or Commissioner] may, in respect of any particular fund, relax the
provisions of clause (c) of rule 4,—
(a) so as to permit the
payment of larger contributions by an employer to the individual accounts of
employees whose salaries do not in each case exceed five hundred rupees per
mensem; and
(b) so
as to permit the crediting by employers to the individual accounts of employees
of periodical bonuses or other contributions of a contingent nature, where the
calculation and payment of such bonuses or other contributions is provided for
on definite principles by the regulations of the fund.
(5) Notwithstanding anything contained in
clause (h) of rule 4, in order to enable an employee to pay the amount
of tax assessed on his total income as determined under sub-rule (4) of rule
11, he shall be entitled to withdraw from the balance to his credit in the
recognised provident fund a sum not exceeding the difference between such
amount and the amount to which he would have been assessed if the transferred
balance referred to in sub-rule (2) of rule 11 had not been included in his
total income.
6.
Employer's annual contributions, when deemed to be income received by employee:-
That portion of the annual
accretion in any previous year to the balance at the credit of an employee
participating in a recognised provident fund as consists of—
(a) Contributions made
by the employer in excess of[14] [twelve] per cent
of the salary of the employee, and
(b) Interest credited on
the balance to the credit of the employee in so far as it [15] [* * *] is
allowed at a rate exceeding such rate as may be fixed by the Central Government
in this behalf by notification[16] in the Official Gazette,
Shall be deemed to have
been received by the employee in that previous year and shall be included in
his total income for that previous year, and shall be liable to income-tax [17] [* * *].
[18] [7. Exemption for employee's contributions:-
An employee participating
in a recognised provident fund shall, in respect of his own contributions to his
individual account in the fund in the previous year, be entitled to a deduction
in the computation of his total income of an amount determined in accordance
with [19] [section 80C].]
8.
Exclusion from total income of accumulated balance:-
The accumulated balance due
and becoming payable to an employee participating in a recognised provident
fund shall be excluded from the computation of his total income—
(i) If he has rendered
continuous service with his employer for a period of five years or more, or
(ii) If, though he has
not rendered such continuous service, the service has been terminated by reason
of the employee's ill-health, or by the contraction or discontinuance of the
employer's business or other cause beyond the control of the employee,[20] [or]
21[21] [(iii) If, on the cessation of his
employment, the employee obtains employment with any other employer, to the
extent the accumulated balance due and becoming payable to him is transferred
to his individual account in any recognised provident fund maintained by such
other employer.
Explanation.—Where the accumulated balance due and becoming payable to
an employee participating in a recognised provident fund maintained by his
employer includes any amount transferred from his individual account in any
other recognised provident fund or funds maintained by his former employer or
employers, then, in computing the period of continuous service for the purposes
of clause (i) or clause (ii) the period or periods for which such
employee rendered continuous service under his former employer or employers
aforesaid shall be included.]
9.
Tax on accumulated balance:-
(1) Where the accumulated balance due to an
employee participating in a recognised provident fund is included in his total
income owing to the provisions of rule 8 not being applicable, the[22] [Assessing]
Officer shall calculate the total of the various sums of [23] [tax] which would
have been payable by the employee in respect of his total income for each of
the years concerned if the fund had not been a recognised provident fund, and
the amount by which such total exceeds the total of all sums paid by or on
behalf of such employee by way of tax for such years shall be payable by the
employee in addition to any other [24] [tax] for which
he may be liable for the previous year in which the accumulated balance due to
him becomes payable.
(2) Where the accumulated balance due to an
employee participating in a recognised provident fund which is not included in
his total income under the provisions of rule 8 becomes payable, an amount
equal to the aggregate of the amounts of super-tax on annual accretions that
would have been payable under section 58E of the Indian Income-tax Act, 1922
(11 of 1922), for any assessment year up to and including the assessment year
1932-33, if the Indian Income-tax (Second Amendment) Act, 1933 (18 of 1933),
had come into force on the 15th day of March, 1930, shall be payable by the
employee in addition to any other tax payable by him for the previous year in
which such balance becomes payable.
10.
Deduction at source of tax payable on accumulated balance:-
The trustees of a
recognised provident fund, or any person authorised by the regulations of the
fund to make payment of accumulated balances due to employees, shall, in cases
where sub-rule (1) of rule 9 applies, at the time an accumulated balance due to
an employee is paid, deduct there from the amount payable under that rule and
all the provisions of Chapter XVIIB shall apply as if the accumulated balance
were income chargeable under the head "Salaries".
11.
Treatment of balance in newly recognised provident fund:-
(1)
Where recognition is accorded to a
provident fund with existing balances, an account shall be made of the fund up
to the day immediately preceding the day on which the
recognition takes effect, showing the balance to the credit of each employee on
such day, and containing such further particulars as the Board may prescribe.
(2) The account shall also show in respect
of the balance to the credit of each employee the amount thereof which is to be
transferred to that employee's account in the recognised provident fund, and
such amount (hereinafter called his transferred balance) shall be shown as the
balance to his credit in the recognised provident fund on the date on which the
recognition of the fund takes effect, and sub-rule (4) of this rule and
sub-rule (5) of rule 5 shall apply thereto.
(3)
Any portion of the balance to the
credit of an employee in the existing fund which is not transferred to the
recognised fund shall be excluded from the accounts of the recognised fund and
shall be liable to income-tax [25] [* * *] in
accordance with the provisions of this Act, other than this Part.
(4)
Subject to such rules as the Board
may make in this behalf, the [26] [Assessing]
Officer shall make a calculation of the aggregate of all sums comprised in a
transferred balance which would have been liable to income-tax if this Part had
been in force from the date of the institution of the fund, without regard to
any tax which may have been paid on any sum, and such aggregate (if any) shall
be deemed to be income received by the employee in the previous year in which
the recognition of the fund takes effect and shall be included in the
employee's total income for that previous year, and, for the purposes of
assessment, the remainder of the transferred balance shall be disregarded, but
no other exemption or relief, by way of refund or otherwise, shall be granted
in respect of any sum comprised in such transferred balance:
Provided that, in
cases of serious accounting difficulty, the [27] [Chief
Commissioner or Commissioner] may, subject to the said rules, make a summary
calculation of such aggregate.
(5)
Nothing in this rule shall affect
the rights of the persons administering an unrecognized provident fund or
dealing with it, or with the balance to the credit of any individual employee
before recognition is accorded, in any manner which may be lawful.
12.
Accounts of recognised provident funds:-
(1) The accounts of a
recognised provident fund shall be maintained by the trustees of the fund and
shall be in such form and for such periods, and shall contain such particulars,
as the Board may prescribe.
(2) The accounts shall be
open to inspection at all reasonable times by income-tax authorities, and the
trustees shall furnish to the [28] [Assessing]
Officer such abstracts thereof as the
Board may prescribe.
13.
Appeals:-
(1)
An employer objecting to an order
of the [29] [Chief
Commissioner or Commissioner] refusing to recognise or an order withdrawing
recognition from a provident fund may appeal, within sixty days of such order,
to the Board.
(2)
The appeal shall be in such form
and shall be verified in such manner and shall be subject to the payment of
such fee as the Board may prescribe.
14.
Treatment of fund transferred by employer to trustee:-
(1)
Where an employer, who maintains a
provident fund (whether recognised or not) for the benefit of his employees and
has not transferred the fund or any portion of it, transfers such fund or
portion to trustees in trust for the employees participating in the fund, the
amount so transferred shall be deemed to be of the nature of capital
expenditure.
(2)
When an employee participating in such
fund is paid the accumulated balance due to him there from, any portion of such
balance as represents his share in the amount so transferred to the trustees
(without addition of interest, and exclusive of the employee's contributions
and interest thereon) shall, if the employer has made effective arrangements to
secure that tax shall be deducted at source from the amount of such shares when
paid to the employee, be deemed to be an expenditure by the employer within the
meaning of section 37, incurred in the previous year in which the accumulated
balance due to the employee is paid.
15.
Provisions relating to rules[30] :-
(1)
In addition to any power conferred
by this Part, the Board may make rules—
(a) Prescribing the
statements and other information to be submitted along with an application for
recognition;
(b) Limiting the
contributions to a recognised provident fund by employees of a company who are
shareholders in the company;
[31] [(bb)
regulating the investment or deposit of the moneys of a recognised provident
fund:
Provided that no rule
made under this clause shall require the investment of more than fifty per cent
of the moneys of such fund in Government securities as defined in section 2 of
the Public Debt Act, 1944[32] (18 of 1944);]
(c) Providing for the
assessment by way of penalty of any consideration received by an employee for
an assignment of, or creation of a charge upon, his beneficial interest in a
recognised provident fund;
(d) Determining the extent
to and the manner in which exemption from payment of [33] [tax] may be
granted in respect of contributions and interest credited to the individual
accounts of employees in a provident fund from which recognition has been
withdrawn; and
(e) Generally, to carry
out the purposes of this Part and to secure such further control over the
recognition of provident funds and the administration of recognised provident
funds as it may deem requisite.
(2)
All rules made under this Part
shall be subject to the provisions of section 296.
PART B
APPROVED SUPERANNUATION FUNDS[34]
[See sections 2(6), 10(13) 10(25) (iii),
36(1) (iv), 87(1)(e)[35] , 192(5), [36] [206]]
1.
Definitions:-
In this Part, unless the context
otherwise requires, "employer", "employee",
"contribution" and "salary" have, in relation to
superannuation funds, the meanings assigned to those expressions in rule 2 of
Part A in relation to provident funds.
2.
Approval and withdrawal of approval:-
(1)
The [37] [Chief
Commissioner or Commissioner] may accord approval to any superannuation fund or
any part of a superannuation fund which, in his opinion, complies with the
requirements of rule 3, and may at any time withdraw such approval, if, in his
opinion, the circumstances of the fund or part cease to warrant the continuance
of the approval.
(2)
The[38] [Chief
Commissioner or Commissioner] shall communicate in writing to the trustees of
the fund the grant of approval with the date on which the approval is to take
effect, and, where the approval is granted subject to conditions, those
conditions.
(3)
The [39] [Chief
Commissioner or Commissioner] shall communicate in writing to the trustees of
the fund any withdrawal of approval with the reasons for such withdrawal and
the date on which the withdrawal is to take effect.
(4)
The [40] [Chief
Commissioner or Commissioner] shall neither refuse nor withdraw approval to any
superannuation fund or any part of a superannuation fund unless he has given
the trustees of that fund a reasonable opportunity of being heard in the
matter.
3.
Conditions for approval:-
In order that a
superannuation fund may receive and retain approval, it shall satisfy the
conditions set out below and any other conditions which the Board may, by rules,
prescribe—
(a)
The fund shall be a fund established under an irrevocable trust in connection
with a trade or undertaking carried on in
(b)
The fund shall have for its sole purpose the provision of annuities for
employees in the trade or undertaking on their retirement at or after a
specified age or on their becoming incapacitated prior to such retirement, or
for the widows, children or dependants of persons who are or have been such
employees on the death of those persons;
(c)
The employer in the trade or undertaking
shall be a contributor to the fund; and
(d) All annuities, pensions and other benefits
granted from the fund shall be payable only in
4. Application
for approval:-
(1)
An application for approval of a
superannuation fund or part of a superannuation fund shall be made in writing
by the trustees of the fund to the [41] [Assessing]
Officer by whom the employer is assessable, and shall be accompanied by a copy
of the instrument under which the fund is established and by two copies of the
rules[42] [and where the
fund has been in existence during any year or years prior to the financial year
in which the application for approval is made, also two copies of the accounts
of the fund relating to such prior year or years (not being more than three
years immediately preceding the year in which the said application is made)]
for which such accounts have been made up, but the [43] [Chief
Commissioner or Commissioner] may require such further information to be
supplied as he thinks pro
(2)
If any alteration in the rules,
constitution, objects or conditions of the fund is made at any time after the
date of the application for approval, the trustees of the fund shall forthwith
communicate such alteration to the [44] [Assessing]
Officer mentioned in sub-rule (1), and in default of such communication, any
approval given shall, unless the [45] [Chief
Commissioner or Commissioner] otherwise orders, be deemed to have been withdrawn
from the date on which the alteration took effect.
5.
Contributions by employer when deemed to be income of employer:-
Where any contributions by
an employer (including the interest thereon, if any) are repaid to the
employer, the amount so repaid shall be deemed for the purpose of income-tax 46[46] [* * *] to be the
income of the employer of the previous year in which it is so repaid.
6.
Deduction of tax on contributions paid to an employee:-
Where any contributions
made by an employer, including interest on contributions, if any, are paid to an
employee during his lifetime 47[47] [in circumstances
other than those referred to in clause (13) of section 10], 48[48] [tax] on the
amount so paid shall be deducted at the average rate of 49[49] [tax] at which
the employee was liable to 50[50] [tax] during the
preceding three years or during the period, if less than three years, when he
was a member of the fund, and shall be paid by the trustees to the credit of
the Central Government within the prescribed time and in such manner as the
Board may direct.
7.
Deduction from pay of and contributions on behalf of employee to be included in
return:-
Where an employer deducts
from the emoluments paid to an employee or pays on his behalf any contributions
of that employee to an approved superannuation fund, he shall include all such
deductions or payments in the return which he is required to furnish under 51[51] [* * *] section
206.
8.
Appeals:-
(1)
An employer objecting to an order
of the 52[52] [Chief
Commissioner or Commissioner] refusing to accord approval to a superannuation fund
or an order withdrawing such approval may appeal, within sixty days of such
order, to the Board.
53[53] (2) the appeal shall be in such form and
shall be verified in such manner and shall be subject to the payment of such
fee as may be prescribed.
9. Liability
of trustees on cessation of approval:-
If a fund or a part of a
fund for any reason ceases to be an approved superannuation fund, the trustees
of the fund shall nevertheless remain liable to tax on any sum paid on account
of returned contributions (including interest on contributions, if any), in so
far as the sum so paid is in respect of contributions made before the fund or
part of the fund ceased to be an approved superannuation fund under the
provisions of this Part.
10.
Particulars to be furnished in respect of superannuation funds:-
The trustees of an approved
superannuation fund and any employer who contributes to an approved
superannuation fund shall, when required by notice from the 54[54] [Assessing]
Officer, within such period, not being less than twenty-one days from the date
of the notice, as may be specified in the notice, furnish such return,
statement, particulars or information, as the 55[55] [Assessing]
Officer may require.
11.
Provisions relating to rules:-
(1) In addition to any power conferred by
this Part, the Board may make rules—
(a)
Prescribing the statements and other information to be submitted along with an
application for approval;
(b)
Prescribing the returns, statements, particulars or information which the 56[56] [Assessing] Officers
may require from the trustees of an approved superannuation fund or from the
employer;
(c)
Limiting the ordinary annual contribution and any other contributions to an
approved superannuation fund by an employer;
57[57] [(cc)
regulating the investment or deposit of the moneys of an approved
superannuation fund:
Provided that no rule
made under this clause shall require the investment of more than fifty per cent
of the moneys of such fund in Government securities as defined in section 2 of
the Public Debt Act, 194458[58] (18 of 1944)
(d)
Providing for the assessment by way of penalty of any consideration received by
an employee for an assignment of, or creation of a charge upon, his beneficial
interest in an approved superannuation fund;
(e)
Determining the extent to, and the manner
in which exemption from payment of 59[59] [tax] may be
granted in respect of any payment made from a superannuation fund from which
approval has been withdrawn;
(f)
Providing for the withdrawal of approval
in the case of a fund which ceases to satisfy the requirements of this Part or
of the rules made there under; and
(g)
Generally, to carry out the purposes of
this Part and to secure such further control over the approval of the
superannuation funds and the administration of approved superannuation funds as
it may deem requisite.
(2)
All rules made under this Part
shall be subject to the provisions of section 296.
PART C
[See sections 2(5), 61[61] [10(25)(iv),] 17(1)(iii),
36(1)(v)]
1.
Definitions:-
In this Part, unless the
context otherwise requires, "employer", "employee",
"contribution" and "salary" have, in relation to gratuity
funds, the meanings assigned to those expressions in rule 2 of Part A in
relation to provident funds.
2.
Approval and withdrawal of approval:-
(1)
The 62[62] [Chief
Commissioner or Commissioner] may accord approval to any gratuity fund which,
in his opinion, complies with the requirements of rule 3 and may at any time
withdraw such approval if, in his opinion, the circumstances of the fund cease
to warrant the continuance of the approval.
(2)
The 63[63] [Chief
Commissioner or Commissioner] shall communicate in writing to the trustees of
the fund the grant of approval with the date on which the approval is to take
effect, and where the approval is granted subject to conditions, those
conditions.
(3)
The 64[64] [Chief
Commissioner or Commissioner] shall communicate in writing to the trustees of
the fund any withdrawal of approval with the reasons for such withdrawal and
the date on which the withdrawal is to take effect.
(4)
The 65[65] [Chief
Commissioner or Commissioner] shall neither refuse nor withdraw approval to any
gratuity fund unless he has given the trustees of that fund a reasonable
opportunity of being heard in the matter.
3.
Conditions for approval:-
In order that a gratuity
fund may receive and retain approval, it shall satisfy the conditions set out
below and any other conditions which the Board may, by rules, prescribe—
(a) The fund shall be a
fund established under an irrevocable trust in connection with a trade or
undertaking carried on in
(b) The fund shall have
for its sole purpose the provision of a gratuity to employees in the trade or
undertaking on their retirement at or after a specified age or on their
becoming incapacitated prior to such retirement or on termination of their
employment after a minimum period of service specified in the rules of the fund
or to the widows, children or dependants of such employees on their death;
(c) The employer in the
trade or undertaking shall be a contributor to the fund; and
(d) All benefits granted
by the fund shall be payable only in
4.
Application for approval:-
(1)
An application for approval of a
gratuity fund shall be made in writing by the trustees of the fund to the 66[66] [Assessing]
Officer by whom the employer is assessable and shall be accompanied by a copy
of the instrument under which the fund is established and by two copies of the
rules 67[67] [and, where the
fund has been in existence during any year or years prior to the financial year
in which the application for approval is made, also two copies of the accounts
of the fund relating to such prior year or years (not being more than three
years immediately preceding the year in which the said application is made)]
for which such accounts have been made up, but the 68[68] [Chief
Commissioner or Commissioner] may require such further information to be
supplied as he thinks proper.
(2) If any alteration in the rules,
constitution, objects or conditions of the fund is made at any time after the
date of the application for approval, the trustees of the fund shall forthwith
communicate such alterations to the 69[69] [Assessing]
Officer mentioned in sub-rule (1), and in default of such communication, any
approval given shall, unless the 70[70] [Chief
Commissioner or Commissioner] otherwise orders, be deemed to have been
withdrawn from the date on which the alteration took effect.
5.
Gratuity deemed to be salary:-
Where any gratuity is paid
to an employee during his lifetime, the gratuity shall be treated as salary
paid to the employee for the purposes of this Act.
6.
Liability of trustees on cessation of approval:-
If a gratuity fund for any reason
ceases to be an approved gratuity fund, the trustees of the fund shall
nevertheless remain liable to tax on any gratuity paid to any employee.
7.
Contributions by employer, when deemed to be income of employer:-
Where any contributions by
an employer (including the interest thereon, if any) are repaid to the
employer, the amount so repaid shall be deemed for the purposes of income-tax 71[71] [* * *] to be the
income of the employer of the previous year in which they are so repaid.
8.
Appeals:-
(1) An employer objecting to an order of the
72[72] [Chief
Commissioner or Commissioner] refusing to accord approval to a gratuity fund or
an order withdrawing such approval may appeal, within sixty days of such order,
to the Board.
73[73] (2) The appeal
shall be in such form and shall be verified in such manner and shall be subject
to the payment of such fee as may be prescribed.
74[74] [8A. Particulars to be furnished in respect
of gratuity funds:-
The trustees of an approved
gratuity fund and any employer who contributes to an approved gratuity fund
shall, when required by notice from the 75[75] [Assessing]
Officer, furnish within such period, not being less than twenty-one days from
the date of the notice, as may be specified in the notice, such return,
statement, particulars or information, as the 76[76] [Assessing]
Officer may require.]
9.
Provisions relating to rules:-
(1)
In addition to any power conferred
in this Part, the Board may make rules—
(a) Prescribing the
statements and other information to be submitted along with an application for
approval;
(b) Limiting the
ordinary annual and other contributions of an employer to the fund;
77[77] [(bb)
regulating the investment or deposit of the moneys of an approved gratuity
fund:
Provided that no rule
made under this clause shall require the investment of more than fifty per cent
of the moneys of such fund in Government securities as defined in section 2 of
the Public Debt Act, 194478[78] (18 of 1944);]
(c) Providing for the assessment
by way of penalty of any consideration received by an employee for an
assignment of, or the creation of a charge upon, his beneficial interest in an
approved gratuity fund;
(d) Providing for the
withdrawal of the approval in the case of a fund which ceases to satisfy the
requirements of this Part or the rules made there under; and
(e) Generally, to carry
out the purposes of this Part and to secure such further control over the
approval of gratuity funds and the administration of gratuity funds as it may
deem requisite.
(2) All rules made under this Part shall be
subject to the provisions of section 296.
DEPARTMENTAL
VIEW
1. Winding up of superannuation fund.—an approved superannuation fund cannot be wound up unless
necessitated by the winding up or discontinuance of the employer's trade or
undertaking. [Circular No. 595, dated 5th March, 1991]
2. Investment of gratuity funds.—Under the amended provisions of rule 101 of the
Income-tax Rules, the contributions received by any approved gratuity fund on
or after 1st April, 1967 will be required to be deposited in a Post Office
Savings Bank Account or in a current account with any scheduled bank or will be
required to be utilised for the purpose of making contributions under the Group
Gratuity Scheme entered into with LIC. [Circular
No. 482, dated 26th March, 1987]
[1]See rules 67
to 81 and Form Nos. 40A to 42.
[2]Should now be substituted by "88(2)(vi)".
[3]Substituted for "Commissioner" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[4]Inserted by the Finance Act, 2006, w.e.f. 1-4-2007.
[5]Substituted for "2008" by the Finance Act, 2008, w.e.f.
1-4-2008, which was substituted for "2007" by the Finance
Act, 2007, w.e.f. 1-4-2007.
[6]Inserted by the Finance Act, 2007, w.e.f. 1-4-2007.
[7]Substituted for "Commissioner" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[8]Ibid.
[9]Substituted by the Finance Act, 2007,
w.e.f. 1-4-2007. Prior to the substitution, clause (ea), as inserted by
the Finance Act, 2006, w.e.f. 1-4-2007, read as under:
"(ea) the fund of an establishment
to which the provisions of sub-section (3) or sub-section (4) of section 1 of
the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of
1952) apply, and such establishment has been exempted under section 17 of the
said Act from the operation of all or any of the provisions of any Scheme
referred to in that section;"
[10]Substituted for "Commissioner" by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1988.
[11]Inserted by the Finance Act, 1974, w.e.f.
1-4-1974.
[12]See rule 75.
[13]Substituted for "Commissioner" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[14]Substituted for "ten" by the Finance Act, 1997,
w.e.f. 1-4-1998.
[15]The words "exceeds one-third of the salary of the
employee or" omitted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1981.
[16]9.5% w.e.f. 1-4-2001: Notification No. 138/2001, dated
30-5-2001:
[17]The words "and super-tax" omitted by the Finance
Act, 1965, w.e.f. 1-4-1965.
[18]Substituted, ibid.
[19]Substituted for "section 80A or, as the case may
be, to a deduction from the amount of income-tax with which he is chargeable on
his total income of an amount of income-tax determined in accordance with
section 87" by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[20]Inserted by the Finance Act, 1974, w.e.f. 1-4-1975.
[21]Ibid.
[22]Substituted for "Income-tax" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[23]Substituted for "income-tax and super-tax" by the
Finance Act, 1965, w.e.f. 1-4-1965.
[24]Substituted for "income-tax and super-tax" by the
Finance Act, 1965, w.e.f. 1-4-1965.
[25]The words "and super-tax" omitted
by the Finance Act, 1965, w.e.f. 1-4-1965.
[26]Substituted for "Income-tax" by the Direct
Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[27]Substituted for "Commissioner", ibid.
[28]Substituted for "Income-tax" by
the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[29]Substituted for "Commissioner", ibid.
[30]See rules 67 to 81.
[31]Inserted by the Taxation Laws (Amendment)
Act, 1970, w.e.f. 1-4-1971.
[33]Substituted for "income-tax and super-tax" by
the Finance Act, 1965, w.e.f. 1-4-1965.
[34]See rules 82 to 97. See also Circular Nos. 44/14/64, dated
23-3-1965; 188, dated 16-1-1976; 444, dated 13-12-1985; 482, dated 26-3-1987;
500, dated 9-12-1987 and 595, dated 5-3-1991 and Instruction Nos. 1357, dated
17-9-1980 and 1549, dated 13-1-1984,
[35]Should now be substituted by "88(2) (vii)".
[36]Substituted for "206(2)" by the Finance Act, 1987,
w.e.f. 1-6-1987.
[37]Substituted for "Commissioner" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[38]Substituted for "Commissioner" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[39]Ibid.
[40]Ibid.
[41]Substituted for "Income-tax", by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[42]Substituted for "and of the accounts of the fund for
the last year" by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971.
[43]Substituted for "Commissioner" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[44]Substituted for "Income-tax", ibid.
[45]Substituted for "Commissioner", ibid.
[46]The words "and super-tax" omitted
by the Finance Act, 1965, w.e.f. 1-4-1965.
[47]Inserted by the Finance Act, 1965, w.e.f.
1-4-1965.
[48]Substituted for "income-tax and
super-tax", ibid.
[49]Ibid.
[50]Ibid.
[51]The words "sub-section (1) of"
omitted by the Finance Act, 1987, w.e.f. 1-6-1987.
[52]Substituted for "Commissioner" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[53]See rule 97 and Form No. 43.
[54]Substituted for "Income-tax" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[55]Ibid.
[56]Ibid.
[57]Inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971.
[59]Substituted for "income-tax and super-tax" by the
Finance Act, 1965, w.e.f. 1-4-1965.
[60]See rules 98 to 111
[61]Inserted by the Finance Act, 1972, w.e.f. 1-4-1973.
[62]Substituted for "Commissioner" by
the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[63]Ibid.
[64]Ibid.
[65]Ibid.
[66]Substituted for "Income-tax" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988
[67]Substituted for "and of the accounts of the fund for
the last three years" by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971.
[68]Substituted for "Commissioner" by
the Direct Tax laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[69]Substituted for "Income-tax", ibid.
[70]Substituted for "Commissioner", ibid.
[71]The words "and super-tax" omitted by the Finance
Act, 1965, w.e.f. 1-4-1965.
[72]Substituted for "Commissioner" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[73]See rule 111 and Form No. 44.
[74]Inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f.
1-4-1971.
[75]Substituted for "Income-tax" by the Direct Tax
Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.
[76]Ibid.
[77]Inserted by the Taxation Laws (Amendment) Act, 1970,
w.e.f. 1-4-1971.