Rule 303 of the Income-tax Rules, 2026

Where this rule sits

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What this rule does

The rule says where the moneys of the fund may be held. Sub-rule (1) permits all moneys contributed to the fund, or received or accrued by way of interest or otherwise, to be deposited in a Post Office Savings Bank Account in India, or deposited in a current account or a savings account with any scheduled bank, or utilised in accordance with rule 307 for making payments under a scheme of insurance or for the purchase of annuities referred to in that rule. Sub-rule (2) provides that any funds not deposited or used as mentioned in sub-rule (1) shall be invested in accordance with the notification of the Ministry of Finance (Department of Financial Services) number F. No. 11/14/2013-pr, dated the 2nd March, 2015, published in the Gazette of India, Extraordinary, Part I, Section 1, as amended from time to time.

Why it is there

A fund holding employees' money cannot be left to invest as it pleases. The rule gives it a small set of safe places to park cash — the Post Office Savings Bank, a scheduled bank account, or the insurance and annuity route in rule 307 — and then routes everything else to a Central Government notification rather than listing permitted securities in the rule itself, so the investment pattern can be changed without amending the rule.

Who it applies to

• The trustees or managers of the fund holding moneys contributed to it
• The fund, in respect of interest received or accrued or any other receipt

What this means in practice

Sub-rule (1) is permissive and sub-rule (2) is mandatory: money may be kept in the three ways listed, but anything not so deposited or used shall be invested in accordance with the named notification. There is no residual discretion between the two — a fund cannot hold money outside sub-rule (1) and outside the notification pattern. The banking options are limited by their terms: a Post Office Savings Bank Account in India, and a current or savings account with any scheduled bank, so an account with a bank that is not a scheduled bank is not within the sub-rule. The pattern to be followed under sub-rule (2) is not set out here; it is the notification of 2nd March, 2015, as amended from time to time, so the applicable pattern is whatever that notification says at the relevant time.

An example

A fund holds Rs 80 lakh. It keeps Rs 5 lakh in a savings account with a scheduled bank for immediate outgoings and applies Rs 15 lakh under rule 307 towards premiums on a scheme of insurance, both within sub-rule (1). The remaining Rs 60 lakh is not deposited or used in any of those ways, so under sub-rule (2) it must be invested in accordance with the Ministry of Finance notification of 2nd March, 2015, as amended.

Where you meet this rule

The trustees meet it in the fund's investment policy and in its annual accounts, where the split between bank deposits, insurance and annuity applications and notified investments is shown.

The words themselves

What people get wrong

• Treating sub-rule (1) as the whole of the fund's investment powers. Anything not deposited or used under it falls under the mandatory sub-rule (2).
• Using an account with a bank that is not a scheduled bank. Sub-rule (1)(b) is confined to a current or savings account with any scheduled bank.
• Looking in the rule for the permitted securities. Sub-rule (2) points to the Ministry of Finance notification of 2nd March, 2015, as amended from time to time.
• Applying moneys to insurance or annuities outside rule 307. Sub-rule (1)(c) permits that use only in accordance with rule 307.

Read with

• Rule 307