Rule 310 of the Income-tax Rules, 2026

Where this rule sits

← Rule 309  ·  Rule 311 →

What this rule does

The rule deals with an employee who assigns or creates a charge upon his beneficial interest in a fund. In that case the Assessing Officer shall give notice to the employee that if he does not secure the cancellation of the assignment or charge within two months of the date of receipt of the notice, the consideration received for the assignment or charge shall be deemed to be income received by him in the tax year in which the fact became known to the Assessing Officer, and shall be assessed accordingly.

The consequence is stated as a deeming: what is brought to tax is the consideration received, and the year of charge is the tax year in which the fact became known to the Assessing Officer.

Why it is there

An interest in the fund is meant to remain the employee's, held for the purposes the fund exists to serve. Assigning it or charging it turns that interest into present money, which is what the assignment consideration represents. The rule does not forbid the assignment; it gives the employee a chance to undo it, and taxes the consideration if he does not. Tying the year of charge to the year the Assessing Officer came to know of the fact answers the practical difficulty that an assignment may surface long after it was made.

Who it applies to

• An employee who assigns or creates a charge upon his beneficial interest in a fund
• The Assessing Officer who gives the notice and makes the assessment

The figures, and what each one turns on

What this means in practice

The two months run from the date of receipt of the notice, not from the assignment or from the date of the notice, and what must be achieved in that time is the cancellation of the assignment or charge, not an explanation of it. The amount deemed to be income is the consideration received for the assignment or charge, so an assignment made for no consideration produces no figure under this rule even though the notice may still issue. The year of charge is fixed by the Department's knowledge rather than by the year of the assignment, which means a long-past assignment can be taxed in a current year. The rule speaks of an assignment or the creation of a charge as separate acts, and both attract the same notice and the same consequence.

An example

An employee assigns his beneficial interest in a fund to a lender for Rs 4,00,000, and the Assessing Officer learns of it during proceedings in a later tax year. The Assessing Officer gives notice, which the employee receives on 10 June. If the assignment is cancelled by 10 August, no amount is deemed to be his income under this rule. If it is not, Rs 4,00,000, being the consideration received, is deemed to be income received by him in the tax year in which the fact became known to the Assessing Officer and is assessed accordingly.

Where you meet this rule

An employee meets it as a notice from the Assessing Officer calling on him to secure cancellation of the assignment or charge within two months, and then in the assessment that brings the consideration to tax.

The words themselves

What people get wrong

• Counting the two months from the date of the notice. The rule counts from the date of receipt of the notice.
• Replying to the notice instead of undoing the assignment. What the rule requires within the two months is cancellation of the assignment or charge.
• Assuming the amount taxed is the value of the interest. The rule deems the consideration received for the assignment or charge to be income.
• Assuming the charge falls in the year of the assignment. The rule fixes the tax year in which the fact became known to the Assessing Officer.
• Treating a charge as outside the rule because the interest was not transferred. Creating a charge upon the beneficial interest attracts the same notice and consequence.