Rule 295: Assigning or charging a beneficial interest in a recognised provident fund
Rule 295 deals with an employee who assigns or creates a charge on the beneficial interest in a recognised provident fund. On learning of it, the Assessing Officer gives notice. If the assignment or charge is not cancelled within two months of receiving the notice, the consideration received is treated as income of the tax year in which the Assessing Officer learned of it. Rules 292 to 300 deal with recognised provident funds under Part A of Schedule XI to the Act.
Official notified Income-tax Rules, 2026Need advice on Rule 295?
This article is for general information. Read the official Rules and applicable Act amendments, including the Taxation and Other Laws (Amendment) Act, 2026. If you need professional advice for your situation, contact Bizeneed.
Bare law
Rule 295 - Assigning or creating a charge on beneficial interest in a recognized provident fund
If an employee assigns or creates a charge on their beneficial interest in a recognised provident fund, the Assessing Officer shall give notice to the employee upon learning of the assignment or charge, which shall inform the employee that if he does not cancel the assignment or charge within two months of receiving the notice, the consideration received for such assignment or charge shall be deemed to be income received by the employee in the tax year in which the Assessing Officer became aware of the situation, and shall be assessed accordingly.
Rule breakdown
Steps
Assessing Officer learns of the assignment or charge.
Notice to the employee.
Two months from receipt of notice to cancel.
If not cancelled, consideration is deemed income of the tax year in which the AO became aware.
Key takeaways
Two months
Time to cancel after notice.
Deemed income
Consideration is taxed if not cancelled.
Year of tax
Year in which the AO became aware.
Practical checklist
- Act quickly on a Rule 295 notice.
Avoid
- Do not pledge your PF balance as security.
FAQs
How long do I have to cancel the charge?
Two months from receiving the notice (Rule 295).
What is taxed?
The consideration received for the assignment or charge.
In which year?
The tax year in which the Assessing Officer became aware.
Glossary
- Beneficial interest
- The employee's interest in the PF balance.
- Charge
- Security created over that interest.