Draft Superannuation Fund Rules 301–306: Conditions, Investment Norms, and Contribution Limits

The Draft Income-tax Rules, 2026 introduce a detailed regulatory scheme for superannuation funds through Rules 301 to 306. These rules collectively define the core concepts, mandate specific conditions for trusts and trustees, prescribe permitted investment avenues, set eligibility conditions for directors, and cap employer contributions for both current and past services.

This article walks through each of these rules in a structured, practical manner, explaining how they affect employers, employees (assessee), and fund administrators.

1. Conceptual Framework of Superannuation Funds – Rule 301

Rule 301 lays the foundation by clarifying key expressions used in Rules 301 to 315. These definitions are crucial for interpreting the operational, compliance, and tax implications of superannuation funds.

1.1 Meaning of Beneficiary, Fund, Trust, and Approving Authority

Rule 301 provides the following meanings:

• “Beneficiary”
  The term “beneficiary” refers to a person described in paragraph 3(b) of Part B of Schedule XI for whom an annuity provision is made. In effect, this is the ultimate recipient in whose favour pension or related annuity benefits are arranged.

• “Fund”
  The expression “fund” means a superannuation fund or a portion of a superannuation fund. It covers any arrangement, regardless of its specific nomenclature, that is created or constituted solely for the purpose of paying pension or family pension by an employer to employees.

  The essential criterion is the exclusive purpose of paying pension or family pension to employees or their families.

• “Trust” and “Trustee”
  “Trust” denotes the trust under which the superannuation fund is set up, and “trustee” is a trustee under that trust. The trust is the legal vehicle through which the fund is administered, and trustees have fiduciary responsibilities in managing fund assets.

• “Approving authority”
  The expression “approving authority” is defined as the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner.

  This authority plays a central role in granting approvals for various aspects of the fund, such as appointment of a company as trustee where required.

Together, these definitions create the legal framework within which all subsequent conditions, limitations, and procedures in Rules 301 to 306 must be interpreted.

2. Governance Requirements for Trust and Trustees – Rule 302

Rule 302 specifies the basic structural and residency conditions for the trust that manages the superannuation fund. These conditions are aimed at ensuring that control and administration remain within India and under the oversight of domestic regulators.

2.1 Location of Trust and Fund

• The fund as well as the trust under which it is established must both be situated in India.
  This ensures that the superannuation arrangement is governed by Indian law and subject to Indian regulatory and tax oversight.

2.2 Minimum Number of Trustees and Corporate Trustees

• The trust is required to have a minimum of two trustees.
• A company (as defined in Section 2(20) of the Companies Act 2013) cannot be appointed as trustee unless prior approval is obtained from the approving authority.

This framework ensures that:

1. There is at least a basic level of plurality in decision-making through multiple trustees.
2. Any corporate involvement in trustee capacity is screened and approved by the income-tax approving authority.

2.3 Residential Status of Trustees

• All trustees of the fund must be resident in India.
• If any trustee permanently leaves India, such trustee is required to vacate office.

This residency requirement is designed to maintain effective domestic supervision, ease of communication with authorities, and compliance with Indian tax and regulatory obligations.

3. Permissible Investment of Fund Assets – Rule 303

Rule 303 deals with how the money of the superannuation fund may be held, applied, or invested. The objective is to protect beneficiaries’ interests while ensuring that funds are invested in secure and approved avenues.

3.1 Modes of Holding and Utilising Fund Moneys