Income Tax Act

Official PDF pages 656–660

SOURCE PDF PAGE 656
nishes the audit report, in such form and manner, as may be prescribed
and verified by such accountant, by that date.
(2) Where the assessee is required, by or under any other law, to get his accounts
audited, then it shall be sufficient compliance of sub-paragraph (1)( c ), if such
assessee—
( a )   gets the accounts of such business audited under such law before the
specified date referred to in section 63; and
( b )   furnishes by that date the report of such audit and a report by an
accountant in such form referred to in sub-paragraph (1)( c ).
(3) If any deduction has been allowed under paragraph 1 in any tax year, no
deduction shall be allowed in respect of such amount in any other tax year.
(4) Where the assessee referred to in paragraph 1 is a firm or an association of
persons or body of individuals, deduction under paragraph 1 shall not be allowed
in computing the income of any of the partners or members of such assessee.
Withdrawal from specified account.
3.   (1) Any amount standing to the credit of the assessee in the specified account
shall not be allowed to be withdrawn except for the purposes specified in the special
scheme or in the deposit scheme.
(2)( a ) Irrespective of anything contained in sub-paragraph (1), if the amount is
utilised for the purchase of specified articles or things, then, such amount shall not
be allowed as deduction under paragraph 1;
( b ) for the purposes of this paragraph, “specified article or thing” means—
( i )   any machinery or plant to be installed in any office premises or residen -
tial accommodation, including any accommodation in the nature of a
guest-house;
( ii )   any office appliances (except computers);
( iii )   any machinery or plant, the whole of the actual cost of which is allowed as
a deduction (whether by way of depreciation or otherwise) in computing
the income chargeable under the head “Profits and gains of business or
profession” of any one tax year;
( iv )   any new machinery or plant to be installed in an industrial undertaking
for the purposes of business of construction, manufacture or production
of any article or thing specified in the list in Schedule XIII.
(3) Where any amount standing to the credit of the assessee in specified account is
withdrawn on closure of such account in any tax year, then the amount computed
as under shall be deemed to be the profits and gains of business or profession for
the tax year and accordingly the following amount shall be charged to income-tax
for that tax year:
A = B – C
where,—
A =   deemed profits and gains of business or profession of that tax year;
B =   amount withdrawn from the specified account on its closure; and

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C =   amount, if any, payable to the Central Government by way of profit
or production share as provided in agreement referred to in section
54.
(4) Where any amount is withdrawn on closure of specified account in a tax year
in which the business of the assessee is no longer in existence, sub-paragraph (3)
shall apply as if the business is in existence in that tax year.
(5) If any amount standing to the credited of the assessee—
( a )   in the specified account is released by the State Bank of India; or
( b )   is withdrawn by the assessee from the site restoration account,
during any tax year for utilisation for the purposes of such business as per the special
scheme or deposit scheme and the same is not so utilised, either wholly or in part
within that tax year, such amount shall be deemed to be the profits and gains of
business of that tax year and accordingly be charged to income-tax for that tax year.
(6) Where any amount standing to the credit of the assessee in the special account
or in the Site Restoration Account is utilised by the assessee for the purposes of any
expenditure in connection with such business in accordance with the scheme or the
deposit scheme, such expenditure shall not be allowed in computing the income
chargeable under the head “Profits and gains of business or profession”.
No deduction of expenditure met through amount withdrawn from specified
account.
4.   (1) If the amount standing to the credit of the assessee in the specified account
is utilised to incur any expenditure for the purpose of business as per the special
scheme or deposit scheme, no deduction against such expenditure shall be allowed
in computing the income chargeable under the head “Profits and gains of business
or profession”.
(2) In this paragraph, “amount standing to the credit of the assessee in the specified
account” includes interest to such accounts.
Sale or transfer of asset acquired as per special scheme or deposit scheme.
5.   (1) Where any asset,––
( a )   is acquired as per the special scheme or the deposit scheme; and
( b )   is sold or transferred to any person in the tax year at any time before the
expiry of eight years from the end of tax year in which it was acquired,
then, the part of cost of asset as is relatable to the deduction allowed under paragraph
1 shall be deemed to be the profits and gains of business of the tax year in which
such asset is sold or transferred and shall accordingly be charged to income-tax
for that tax year.
(2) Sub-paragraph (1) shall not apply, if the asset is sold or transferred by—
( a )   the assessee to the specified person; or
( b )   a firm to a company in connection with succession of business or profes -
sion of the firm by such company subject to the following conditions:—
( i )   the provisions of special scheme or deposit scheme is applicable
to the company in the same manner as it applied to the firm;

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( ii )   all the properties of the firm relating to the business or profession
immediately before the succession becomes the properties of the
company;
( iii )   all the liabilities of the firm relating to the business or profession
immediately before the succession becomes the liabilities of the
company; and
( iv )   all the shareholders of the company were partners of the firm im -
mediately before the succession.
(3) In this paragraph, “specified person” means—
( a )   Government; or
( b )   a local authority; or
( c )   a corporation established by or under a Central, State or Provincial Act;
or
( d )   a Government company as defined in section 2( 45 ) of the Companies
Act, 2013 (18 of 2013).
Interpretation.
6.   For the purposes of this Schedule,—
( a )   “amount standing to the credit of the assessee” pertaining to the specified
account includes interest accrued to such accounts;
( b )   “deposit scheme” means a scheme made in this behalf by the Ministry
of Petroleum and Natural Gas;
( c )   “specified account” means a special account or site restoration account;
( d )   “special account” means an account maintained with the State Bank
of India for making deposits in accordance with, and for the purposes
specified in the special scheme;
( e )   “special scheme” means a scheme approved in this behalf by the Gov -
ernment of India in the Ministry of Petroleum and Natural Gas;
( f )   “site restoration account” means an account opened by the assessee for
making deposits in accordance with, and for the purposes specified in
the deposit scheme;
( g )   “State Bank of India” means the State Bank of India constituted under
the State Bank of India Act, 1955 (23 of 1955).
SCHEDULE XI
[ See   section 2( 91 )]
PART A
RECOGNISED PROVIDENT FUNDS
Application of Part
1.   This Part shall not apply to any provident fund to which the Provident Funds
Act, 1925 (19 of 1925), applies.

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Definiti ons.
2.   For the purposes of this Part, unless the context otherwise requires,—
( a )   “approving authority” means the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner;
( b )   “employer” means any person who maintains a provident fund for the
benefit of his or its employees, being—
( i )   a Hindu undivided family, company, firm or other association of
persons, or
( ii )   an individual engaged in a business or profession, the profits and
gains whereof are assessable to income-tax under the head “Profits
and gains of business or profession”;
( c )   “employee” means an employee participating in a provident fund, ex -
cluding personal or domestic servant;
( d )   “contribution” means any sum credited by or on behalf of any employee
out of his salary, or by an employer out of his own funds, to the individual
account of an employee, excluding any sum credited as interest;
( e )   “balance to the credit of an employee” means the total amount to the
credit of his individual account in a provident fund at any time;
( f )   “annual accretion”, in relation to the balance to the credit of an employee
means the increase to such balance, in any year arising from contribu -
tions and interest;
( g )   “accumulated balance due to an employee” means the balance to his
credit, or portion thereof claimable by the employee under the regula -
tions of the fund, on the day he ceases to be an employee of the employer
maintaining the fund;
( h )   “regulations of a fund” means the specific regulations governing the
constitution and administration of a particular provident fund; and
( i )   “salary” includes dearness allowance, if provided for in the terms of
employment, but excludes all other allowances and perquisites.
Recognition to provident fund and its withdrawal.
3.   (1) The approving authority may grant recognition to a provident fund, which in
his opinion, satisfies the conditions prescribed in paragraph 4 and the rules made
by the Board in this regard and may, at any time, withdraw such recognition if, in
his opinion, the provident fund violates any of those conditions.
(2) An order granting recognition shall take effect on such date specified by the ap -
proving authority as per any rules made or may be made by the Board in this behalf,
such date not being later than the last day of the tax year in which the order is made.
(3) An order withdrawing recognition shall take effect from the date on which it
is made.
(4) An order according recognition to a provident fund shall not, unless the approving
authority otherwise directs, be affected by the fact that—

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( a )   the fund is subsequently amalgamated with another provident fund on
the occurrence of an amalgamation of the undertakings in connection
with which the two funds are maintained; or
( b )   the fund subsequently absorbs the whole or a part of another provident
fund belonging to an undertaking which is wholly or in part transferred to
or merged in the undertaking of the employer maintaining the first-men -
tioned fund.
Conditions to be satisfied by recognised provident funds.
4.   In order to receive and retain recognition, a provident fund, shall, subject to the
provisions of paragraph 5, satisfy the following conditions and any other conditions
as may be prescribed—
( a )   all employees shall be employed in India, or employed by an employer
whose principal place of business is in India;
( b )   the contributions of an employee in any year shall be a fixed proportion
of his salary for that year, deducted by the employer from each periodi -
cal payment of salary in that proportion and credited to the employee’s
individual account in the fund;
( c )  
44
[ *** ]
( d )   the fund shall be vested in two or more trustees or the Official Trustee
under a trust which shall not be revocable, except with the consent of
all the beneficiaries;
( e )   the fund shall consist only of––
( i )   contributions as specified above, received by the trustees;
( ii )   accumulations thereof;
( iii )   interest credited in respect of such contributions and accumulations;
( iv )   securities purchased therewith; and
( v )   any capital gains arising from the transfer of capital assets of the
fund;
45
[ ( f )   the fund shall be a fund––
44.   Omitted by the Finance Act, 2026, w.e.f.   1-4-2026 . Prior to its omission, clause ( c ) read as
under :
“( c )   the employer’s contributions to the employee’s account in any year shall not exceed
the employee’s contribution in that year, and shall be credited to the employee’s
account at intervals not exceeding one year;”
45.   Substituted by the Finance Act, 2026, w.e.f.   1-4-2026 . Prior to its substitution, clause ( f ) read
as under :
“( f )   the fund shall be the fund of an establishment—
( i )   to which the provisions of section 1(3) of the Employees’ Provident Funds
and Miscellaneous Provisions Act, 1952 (19 of 1952) apply; or
( ii )   notified by the Central Provident Fund Commissioner under section 1(4)   of
the said Act,
and such establishment shall be exempted from the operation of all or any of the
provisions of any scheme mentioned in section 17 of the said Act;”