Rule 323: Assigning or charging interest in a gratuity fund
Rule 323 deals with assignment or charge of a beneficial interest in a gratuity fund. Rules 316 to 329 govern approved gratuity funds under Part B of Schedule XI to the Act. The Assessing Officer gives notice; if cancellation is not secured within two months of receipt, the consideration is deemed income of the tax year in which the fact became known to the Assessing Officer.
Official notified Income-tax Rules, 2026Need advice on Rule 323?
This article is for general information. Read the official Rules and applicable Act amendments, including the Taxation and Other Laws (Amendment) Act, 2026. If you need professional advice for your situation, contact Bizeneed.
Bare law
Rule 323 - Assigning or creating a charge on beneficial interest in a gratuity fund
If an employee assigns or creates a charge upon his beneficial interest in a gratuity fund, the Assessing Officer shall give notice to the employee that if he does not secure the cancellation of the assignment or charge within two months of the date of receipt of the notice, the consideration received for such assignment or charge shall be deemed to be income received by him in the tax year in which the fact became known to the Assessing Officer and shall be assessed accordingly.
Rule breakdown
Steps
AO notice.
Two months to secure cancellation.
Otherwise consideration is deemed income.
Key takeaways
Two months
Window to cancel.
Deemed income
If not cancelled.
Parallel
Rules 295 and 310.
Practical checklist
- Cancel promptly.
Avoid
- Do not assign your gratuity interest.
FAQs
What is the time limit?
Two months from receipt of notice (Rule 323).
What is taxed?
The consideration received.
Which year?
The year the fact became known to the AO.
Glossary
- Charge
- Security over the beneficial interest.
- Beneficial interest
- Employee's interest in the fund.