Circular No. 482 — 1334. Contribution received by any approved gratuity fund - Approved modes of depositing -

What this is

Circular No. 482 was issued by the Central Board of Direct Taxes on 26 March 1987. Its subject is 1334. Contribution received by any approved gratuity fund - Approved modes of depositing - Part C of Fourth Schedule read with rule 101/67 of Income-tax Rules.

This amends the Income-tax Rules. What it changes is the Rules, not the Act — and a rule can never take away what the section gives.

What it does

Notes the Income-tax (Second Amendment) Rules, 1987, gazetted on 9th March 1987, which amend rule 101 with effect from 1st April 1987 and narrow where an approved gratuity fund may keep its money. Until then, contributions had to go into a Post Office Savings Bank Account, a current account with a scheduled bank, or contributions under a Group Gratuity Scheme with the Life Insurance Corporation of India, and anything not so deposited or used had to be invested in the modes specified in rule 67(2). After the amendment, contributions received by an approved gratuity fund on or after 1st April 1987 must go into one of the first three, and may no longer be put into the rule 67(2) modes of investment.

Why it was issued

The circular communicates the amendment to rule 101 made by the Income-tax (Second Amendment) Rules, 1987, read with Part C of the Fourth Schedule.

Who it reaches

Trustees of approved gratuity funds
Employers who have set up gratuity trusts
Life Insurance Corporation group gratuity scheme administrators
Commissioners granting or continuing approval of gratuity funds

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

1334. Contribution received by any approved gratuity fund - Approved modes of depositing - Part C of Fourth Schedule read with rule 101/67 of Income-tax Rules
1. The Government has notified in the Official Gazette dated 9-3-1987, the Income-tax (Second Amendment) Rules, 1987. The said Amendment Rules amend the provisions of rule 101 of the Income-tax Rules, 1962 (‘the Rules’) with effect from April 1, 1987.
2. Under the existing provisions of rule 101 monies contributed to approved gratuity funds are required to be deposited in a Post Office Savings Bank Account or a current account with any schedule bank, or are required to be utilised for the purpose of making contributions under Group Gratuity Scheme entered into with the Life Insurance Corporation of India. To the extent such monies are not so deposited or utilised, they are required to be invested in the modes of investment specified in rule 67(2) of the Rules.
3. Under the amended provisions, the contributions received by any approved gratuity fund on or after April 1, 1987, 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 Group Gratuity Scheme entered into with the Life Insurance Corporation of India. The contributions will not be permitted to be deposited in any of the modes of investment specified in rule 67(2).
Circular: No. 482 [F.No. 19/FB/87-TPL], dated 26-3-1987.

What to watch

The restriction attaches to contributions received on or after 1st April 1987; it does not by its terms speak to what was already invested.
The rule 67(2) modes, which remain open to provident funds, are closed to gratuity fund contributions after that date.
Continued approval of the fund depends on compliance with Part C of the Fourth Schedule and rule 101, so a wrong deposit puts the approval at risk.
Rule 101 has been amended more than once since; read the rule as it stands for the year in hand.

Where you meet it

In a Commissioner's enquiry into continued approval of a gratuity fund, and in an employer's assessment where a contribution to a gratuity fund is questioned.

What it names

Rules it names. Rule 101, 67 of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.

← Circular No. 483 · Circular No. 481, dated 20-2-1987 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.