Rules 276 and 277 of the Draft Income-tax Rules, 2026 set out compliance requirements for eligible investment funds and the method for computing taxable interest on provident fund contributions exceeding specified limits. Rule 276 requires an eligible investment fund claiming benefit under section 9(12) read with Schedule I to furnish an annual statement electronically to the Assessing Officer in Form No. 173 under digital signature for each financial year. The Assessing Officer for this purpose is the officer having jurisdiction over the fund or the officer who would have had jurisdiction if the fund were assessable to tax in India but for the provisions of section 9(12).
Rule 277 provides the framework for calculating taxable interest on contributions made to a provident fund or recognised provident fund that exceed the prescribed threshold limits. Taxable interest is defined as the interest accrued during the tax year on the taxable contribution account. To compute this amount, separate accounts must be maintained within the provident fund account from the tax year 2021–22 onwards for taxable and non-taxable contributions. The non-taxable contribution account includes the closing balance as of 31 March 2021, eligible contributions made in subsequent years that do not exceed the specified limits, and the interest accrued thereon, reduced by withdrawals. The taxable contribution account includes contributions exceeding the threshold limit made during the relevant tax year and the interest accrued on such excess contributions, reduced by withdrawals. The threshold limit is ₹5 lakh where no employer contribution is made and ₹2.5 lakh in other cases. Taxable interest refers to interest income that is not exempt from inclusion in total income.
Extract of Rules No. 276, 277 of Draft Income-tax Rules, 2026
Rule 276
Statement to be furnished by the eligible investment fund under section 9(12) read with Schedule I of the Act.
(1) The statement required under paragraph 1(4) of Schedule I shall be furnished to the Assessing Officer electronically under digital signature, for every financial year by the eligible investment fund in Form No. 173 duly verified in the manner indicated therein.
(2) The Assessing Officer referred to in sub-rule (1) is the Assessing Officer who has the jurisdiction over the fund or would have had the jurisdiction had the fund been assessable to tax in India but for the provision of section 9(12).
Rule 277
Calculation of taxable interest relating to contribution in a provident fund or recognised provident fund, exceeding specified limit.
(1) Taxable interest for Schedule II [Table: Sl. No 3 and 4 Col (C)] shall be computed as the interest accrued in the taxable contribution account during the tax year.
(2) For the purpose of calculation of taxable interest under sub-rule (1), separate accounts within the provident fund account shall be maintained during the tax year 2021-22 and all subsequent tax years for taxable contribution and non-taxable contribution made by a person.
(3) For the purposes of this rule,—
(a) non-taxable contribution account shall be the aggregate of the following, namely:—
(i) closing balance in the account as on 31st day of March, 2021;
(ii) any contribution made by the person in the account during the tax year 2021-22 and subsequent tax years, which is not included in the taxable contribution account; and
(iii) interest accrued on sub-clause (i) and sub-clause (ii),
as reduced by the withdrawal, if any, from such account;
(b) taxable contribution account shall be the aggregate of the following, namely:—
(i) contribution made by the person in a tax year in the account during the tax year 2021-22 and subsequent tax years, which is in excess of the threshold limit; and
(ii) interest accrued on sub-clause (i),
as reduced by the withdrawal, if any, from such account;
(c) “taxable interest” shall mean income by way of interest accrued during the tax year which is not exempt from inclusion in the total income of a person;
(d) The threshold limit for the purposes of sub-rule 3(b)(i) shall mean,
(i) five lakh rupees, where no contribution is made by the employer of such person; and
(ii) two lakh and fifty thousand rupees in other cases.
