Rule 292: Investment pattern for recognised provident fund money
Rule 292 tells trustees how provident fund money must be invested. All contributions, transfers and accruals are invested as per a Table: at least 45% in Government securities and related investments, at least 35% in debt instruments, up to 5% in short-term debt, at least 5% in equities and related investments, and up to 5% in asset-backed, trust structured and miscellaneous investments. Meanings come from the Ministry of Labour and Employment notification S.O. 1433(E) of 29 May 2015, as amended. Rules 292 to 300 deal with recognised provident funds under Part A of Schedule XI to the Act.
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Bare law
Rule 292 - Investment of fund moneys
(1) All contributions to a provident fund, whether made by the employer or the employees, or transferred from an individual account of the employee in a recognized provident fund maintained by a former employer, or accrued as interest or otherwise, shall be invested in the instruments given in column 2 of the following Table subject to the percentages given in column 3 thereof:
Table Sl. No. (1) Investment (2) Percentage amount to be invested in items referred to in column 2 (3) 1. Government Securities and Related Investments. Minimum 45%. 2. Debt Instruments and Related Investments. Minimum 35%. 3. Short-term Debt Instruments and Related Investments. Up to 5%. 4. Equities and Related Investments. Minimum 5%. 5. Asset Backed, Trust Structured and Miscellaneous Investments. Up to 5%. (2) The nature of investments referred to in sub-rule (1) shall have their respective meanings as specified in notification number S.O. 1433(E), dated the 29th of May, 2015, issued by the Ministry of Labour and Employment, Government of India in this behalf, as amended from time to time, and the said investments shall be subject to such conditions as specified in the said notification.
(3) Any funds that are not invested in the manner specified under sub-rule(1) may be deposited into–
(i) a Post Office Savings Bank Account in India; or
(ii) a current account or Savings Bank Account with any scheduled bank.
(4) For the purposes of this rule,—
(a) the expression "Government securities" shall have the same meaning as assigned to it in section 2(f) of the Government Securities Act, 2006 (38 of 2006);
(b) the manner of investment specified in sub-rule (1) shall apply to the aggregate amount of moneys with the fund in the tax year;
(c) moneys received 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; and
(d) "scheduled bank" means–
(i) the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955); or
(ii) a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) ; or
(iii) 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
(iv) any other bank, being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934).
Rule breakdown
Investment pattern: Rule 292(1)
Government securities and related investments: minimum 45%.
Debt instruments and related investments: minimum 35%.
Short-term debt instruments and related investments: up to 5%.
Equities and related investments: minimum 5%.
Asset backed, trust structured and miscellaneous investments: up to 5%.
Other points: Rule 292(2) to (4)
Meanings and conditions follow notification S.O. 1433(E) dated 29 May 2015 of the Ministry of Labour and Employment, as amended.
Money not invested as per the pattern may be kept in a Post Office Savings Bank account or a current or savings account with a scheduled bank.
The pattern applies to the aggregate moneys with the fund in the tax year; maturity, sale and withdrawal proceeds are treated as moneys accruing to the fund.
Key takeaways
45% G-secs
At least 45% in Government securities.
Caps
Short-term debt and asset-backed items up to 5% each.
Aggregate test
Pattern applies to aggregate moneys in the tax year.
Practical checklist
- Review the portfolio against the Table at least once a tax year.
- Keep the S.O. 1433(E) notification, as amended, with the trust records.
Avoid
- Do not exceed 5% in short-term debt or in asset-backed, trust structured and miscellaneous investments.
FAQs
What is the minimum in Government securities?
45% (Table in Rule 292(1)).
Can provident fund money be kept in a bank account?
Money not invested as per sub-rule (1) may be deposited in a Post Office Savings Bank account or a current or savings account with a scheduled bank (Rule 292(3)).
Where are the investment categories defined?
In notification S.O. 1433(E) dated 29 May 2015 of the Ministry of Labour and Employment, as amended (Rule 292(2)).
Glossary
- Scheduled bank
- As defined in Rule 292(4)(d), including SBI, nationalised banks and banks in the Second Schedule to the RBI Act, 1934.
- Government securities
- As defined in section 2(f) of the Government Securities Act, 2006.