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Rule 67 of Income Tax Rules 1962: Investment of Fund Moneys

Rule 67 : Investment of fund moneys.
(Part XII : Recognised Provident Funds)

(1) All moneys contributed to a provident fund (whether by the employer or by the employees) after the 31st day of October, 1974, or transferred after that date from the individual account of an employee in any recognised provident fund maintained by his former employer or accruing after that date by way of interest or otherwise to the fund may be deposited in a Post Office Savings Bank Account in India or in a current account or a Savings Bank Account with any scheduled bank; and to the extent such moneys as are not so deposited (such moneys as are not so deposited being hereafter in this rule referred to as investible moneys) shall be invested in the manner specified in sub-rule (2).


Explanation : For the purposes of this rule and rules 85 and 101,—

(i) moneys received after the 31st day of October, 1974, on transfer, maturity or realisation of any security or deposit forming part of a fund or by withdrawal from any account in a bank (including a Post Office Savings Bank Account) shall be deemed to be moneys accruing to the fund after that date;

(ii) "scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank, being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934).

(2) The manner of investment referred to in sub-rule (1) shall be in accordance with the following Table, namely :—

TABLE
INVESTMENT PATTERN

Sl. No.

Investment
Maximum percentage amount to be invested in items referred to in column (2)
(1)

(2)
(3)
(i)
(a)
in Government securities;
Fifty-five per cent.

(b)
other securities, as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956, the principal whereof and interest whereon is fully and unconditionally guaranteed by the Central Government, or any State Government, except those covered under (ii)(a) below; and/or


(c)
units of mutual funds set up as dedicated funds for investment in Government securities and regulated by the Securities and Exchange Board of India

(ii)
(a)
Debt securities with maturity of not less than three
Forty per cent.


years tenure issued by Bodies Corporate, including banks and public financial institutions;


(b)
Term Deposit Receipts of not less than one year duration issued by scheduled commercial banks fulfilling all the following criteria:



(i) it has made profit continuously for immediately preceding three years;



(ii) it is maintaining a minimum Capital to Risk Weighted Assets Ratio of 9 per cent;



(iii) it is having net non-performing assets of not more than 2 per cent of the net advances; and



(iv) it is having a minimum net worth of not less than rupees 200 crores; and/or


(c)
Rupee Bonds having an outstanding maturity of at least three years issued by institutions of the International Bank for Reconstruction and Development, International Finance Corporation and the Asian Development Bank

(iii)
Money market instruments including units of money market mutual funds
Five per cent.
(iv)
Shares of companies on which derivatives are available in Bombay Stock Exchange or National Stock Exchange or equity linked schemes of mutual funds regulated by the Securities and Exchange Board of India
Fifteen per cent :


Provided that any moneys received on the maturity of investments made prior to the 1st day of April, 2009, reduced by obligatory outgoings, shall be invested in accordance with the manner of investment specified in this sub-rule :

Provided further that the investment pattern specified in this sub-rule may be achieved by the end of the previous year; so however that at no time during the year investment in any category should exceed by more than ten per cent of the limit prescribed :

Provided also that, irrespective of the proportion of investments stated in clause (i) of the said Table, exposure of a trust to any individual mutual fund, under sub-clause (c) of the said clause, which has been set up as a dedicated fund for investment in Government securities, shall not exceed five per cent of its total portfolio at any point of time :

Provided also that the trustees shall invest at least 75 per cent of the amount invested under sub-clause (a) of clause (ii) of the said Table in instruments having an investment grade rating from at least one credit rating agency registered under sub-section (1A) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) :

Provided also that in the event of the rating of any instruments mentioned in this sub-rule for being rated and their rating falling below the investment grade, as certified by one credit rating agencies registered under sub-section (1A) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), then the option of exit from such instruments can be exercised and the released funds shall be invested in accordance with the manner provided in the Table of this sub-rule :

Provided also that the turnover ratio, being the value of securities traded in the year divided by the average value of the portfolio at beginning of the year and the end of the year, should not exceed two.
Explanation 1.—The manner of investment specified in this sub-rule shall apply to the aggregate amount of investible moneys with the fund in the previous year.

Explanation 2.—For the purposes of this sub-rule,—
(i) the expression "Government securities" shall have the meaning assigned to it in clause (b) of section 2 of the Securities Contracts (Regulation) Act, 1956;
(ii) the expression "public financial institutions" shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);
(iii) the expression "public sector company" shall have the meaning assigned to it in clause (36A) of section 2 of the Income-tax Act;
(iv) the expression "public sector bank" shall have the meaning assigned to it in clause (23D) of section 10 of the Income-tax Act; and
(v) the expression "securities" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.



Extra Notes for Readers:

- Rule 67 was substituted by the Income Tax (4th Amendment) Rules, 1974, w.e.f. 1st Nov. 1974


Reference/Source: Check at Income Tax site for latest version of the Rules - link

This page was last updated on 17th October 2016.
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