Rule 286: Approval of an employees' welfare fund under Schedule VII
Rule 286 sets requirements for approval of a fund established for purposes notified by the Board for the welfare of employees and their dependants, under Schedule VII [Table: Sl. No. 2]. The fund must be formed under a trust evidenced by a trust deed, and employees contribute by periodical subscription. The application is made in Form No. 180 to the jurisdictional PCIT or CIT, who approves for up to three tax years or rejects after a hearing.
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Bare law
Rule 286 - Requirements for approval of a fund for welfare of employees and their dependents under Schedule VII [Table: Sl. No. 2] to Act
(1) Any fund established for such purposes as may be notified by the Board for the welfare of employees and their dependents (where such employees are member of such fund) shall be formed under a trust and it shall be evidenced by a trust deed.
(2) The contributions to the fund are to be made by the employees by way of periodical subscription.
(3) The application for approval shall be made in Form No. 180 to the Principal Commissioner of Income-tax or Commissioner of Income-tax having jurisdiction over the area or territory in which the accounts are kept and such application shall be accompanied by the documents mentioned therein.
(4) The Principal Commissioner of Income-tax or Commissioner of Income-tax, where he is satisfied that, —
(a) all the conditions laid down in Schedule VII [Table: Sl. No.2] to the Act and this rule are fulfilled, he shall record such satisfaction in writing and grant approval to the fund specifying the tax year or years not exceeding three tax years for which the approval shall be valid;
(b) if any of the conditions laid down in Schedule VII [Table: Sl. No.2] to the Act and this rule is not fulfilled, he shall reject the application for approval, after recording the reasons for such rejection in writing.
(5) No order of rejection of an application shall be passed without giving a reasonable opportunity of being heard.
Rule breakdown
Requirements: Rule 286(1) and (2)
Formed under a trust evidenced by a trust deed.
Employees who are members contribute by periodical subscription.
Application and decision: Rule 286(3) to (5)
Form No. 180 to the Principal Commissioner or Commissioner having jurisdiction where the accounts are kept, with the documents mentioned in the form.
If all conditions are met, approval in writing for tax years not exceeding three.
If not, rejection with reasons recorded in writing, after a reasonable opportunity of being heard.
Key takeaways
Trust deed
Fund must be a trust evidenced by a deed.
Form No. 180
The application form.
Three years
Approval for not more than three tax years.
Practical checklist
- Track the approval expiry and reapply in time.
Avoid
- Do not set up the fund without a trust deed.
FAQs
Which form is used?
Form No. 180 (Rule 286(3)).
How long is approval valid?
For the tax year or years specified, not exceeding three (Rule 286(4)(a)).
Can the application be rejected without a hearing?
No (Rule 286(5)).
Glossary
- Periodical subscription
- Regular contributions by employee members (Rule 286(2)).
- Form No. 180
- Application for approval under Rule 286(3).