Rule 305: Limit on ordinary annual employer contributions to a superannuation fund
Rule 305 caps the employer's ordinary annual contribution to a superannuation fund for each employee. Rules 301 to 315 govern approved superannuation funds under Part B of Schedule XI to the Act. It cannot exceed 27% of salary for the year, reduced by any contribution the employer made to a provident fund (recognised or not) for that employee in the same year.
Official notified Income-tax Rules, 2026Need advice on Rule 305?
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Bare law
Rule 305 - Ordinary annual contributions
The yearly contribution of the employer to a fund for each employee shall not exceed 27% of their salary for each year as reduced by any contributions the employer made to a provident fund for the same employee during that year, whether recognised or not.
Rule breakdown
The cap
27% of the employee's salary for the year.
Less employer contributions to any provident fund, recognised or not, for the same employee that year.
Key takeaways
27% ceiling
Overall ceiling of 27% of salary.
PF set-off
Employer PF contributions reduce the limit.
Per employee
Worked out for each employee.
Practical checklist
- Compute the limit employee by employee.
Avoid
- Do not ignore employer PF contributions when applying the 27% cap.
FAQs
What is the annual limit?
27% of salary less the employer's PF contribution for the same employee in that year (Rule 305).
Does an unrecognised PF count?
Yes, "whether recognised or not".
Is there a limit for past service?
Yes, see Rule 306.
Glossary
- Ordinary annual contribution
- Regular yearly employer contribution.
- Salary
- The employee's salary used for the cap.