Rule 286 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 286 of the Income-tax Rules, 2026 requires an employee welfare fund to be formed under a trust deed and funded by periodical employee subscription, approved in Form No. 180 for not more than three tax years; rules 290 and 291 put the Schedule IX and X audit reports in Forms No. 182 and 183.
How the fund must be constituted
Sub-rule (1) of rule 286: any fund established for such purposes as may be notified by the Board for the welfare of employees and their dependents — where those employees are members of the fund — shall be formed under a trust, and that shall be evidenced by a trust deed. The 1962 parallel is rule 16C.
Sub-rule (2): contributions to the fund are to be made by the employees by way of periodical subscription.
Two features of rule 286 point the same way and are easy to overlook when structuring a welfare scheme. Sub-rule (1) requires the beneficiaries — the employees — to be members of the fund. Sub-rule (2) requires the contributions to come from the employees, by periodical subscription. An employer-funded welfare scheme, or one taking a lump-sum corpus rather than periodical subscriptions, does not answer this description, however genuinely it serves employee welfare. Approval under Schedule VII is designed for a subscription-based employees' mutual fund held on trust.
The application and the decision
| Element | Provision in rule 286 |
|---|---|
| Form | Form No. 180, accompanied by the documents mentioned in it — sub-rule (3) |
| Addressed to | The Principal Commissioner or Commissioner of Income-tax having jurisdiction over the area or territory in which the accounts are kept |
| On satisfaction | Where all the conditions in Schedule VII and the rule are fulfilled, he shall record his satisfaction in writing and grant approval, specifying the tax year or years, not exceeding three tax years, for which it is valid — sub-rule (4)(a) |
| On failure | Where any condition is not fulfilled, he shall reject the application after recording the reasons in writing — sub-rule (4)(b) |
| Safeguard | No order of rejection without a reasonable opportunity of being heard — sub-rule (5) |
Two practical points. The Commissioner is identified by where the fund's accounts are kept — not where the employer is assessed, and not where the employees work. A fund whose accounting is centralised elsewhere applies to that Commissioner.
And the approval is time-limited to a maximum of three tax years. Unlike an investment fund's approval under rule 275, which runs into subsequent years unless withdrawn, this one lapses by effluxion of time. A fund must diarise the expiry and apply afresh; there is no deemed continuation, and no order is needed to end it.
Note the asymmetry in sub-rules (4) and (5). Reasons in writing are required for a rejection, and satisfaction recorded in writing for a grant — so both outcomes leave a record. But the hearing in sub-rule (5) attaches only to a rejection, which is where it is needed.
Rule 290 — the Schedule IX audit report
The report of audit of the accounts of an assessee required under paragraph 2 of Schedule IX read with section 48 shall be in Form No. 182. The 1962 parallel is rule 5AC.
Schedule IX read with section 48 carries the deduction for a tea development account, coffee development account and rubber development account — the deposit-linked deduction available to growers who put a portion of profits into a designated account for development. The deduction depends on the deposit and on an audit report, and rule 290 supplies the form for that report.
Rule 291 — the Schedule X audit report
The report of audit of the accounts required under paragraph 2 of Schedule X read with section 49 shall be in Form No. 183. The 1962 parallel is rule 5AD.
Schedule X read with section 49 carries the site restoration fund deduction — the analogous deposit-linked relief for businesses extracting mineral oil or natural gas, which must fund the eventual restoration of the site.
| Rule | Schedule and section | Deduction | Form |
|---|---|---|---|
| 290 | Paragraph 2 of Schedule IX read with section 48 | Tea, coffee and rubber development accounts | Form No. 182 |
| 291 | Paragraph 2 of Schedule X read with section 49 | Site restoration fund | Form No. 183 |
Rules 290 and 291 prescribe nothing but a form number each. That understates them. Both Schedule IX and Schedule X make the deduction conditional on furnishing the audit report, so a grower or an oil business that deposits correctly but files the wrong form — or no form — loses the deduction on a purely procedural footing. The two forms are not interchangeable: Form No. 182 is the plantation deposit report and Form No. 183 the site restoration report, and each belongs to its own Schedule.
Read alongside rule 271, which fixes the taxable percentage of rubber, coffee and tea income, rule 290 completes the plantation picture: the percentage decides how much is taxable, and Schedule IX with Form No. 182 decides how much of that is deferred into a development account.
Worked example
| Facts | Position under rule 286, rule 290 and rule 291 |
|---|---|
| Welfare scheme funded wholly by the employer | Outside rule 286 — contributions must come from employees |
| Employees pay a monthly subscription into a trust | Within sub-rules (1) and (2) |
| Scheme run as an unincorporated association without a deed | Fails — a trust evidenced by a trust deed is required |
| Accounts kept in Hyderabad; employer assessed in Mumbai | Apply to the Commissioner for Hyderabad |
| Approval granted for three tax years | Lapses at the end of the third; apply afresh |
| Application rejected without a hearing | Contrary to sub-rule (5) |
| Rejection order carries no reasons | Contrary to sub-rule (4)(b) |
| Tea grower deposits into a development account | Audit report in Form No. 182 |
| Oil producer funds site restoration | Audit report in Form No. 183 |
| Coffee grower files Form No. 183 | Wrong form — Schedule IX takes Form No. 182 |
Compliance checklist
- Constitute the welfare fund under a trust with a written deed before applying.
- Ensure the employees are members and contribute by periodical subscription.
- Confirm the purposes are among those notified by the Board.
- File Form No. 180 with the Commissioner for the area where the accounts are kept, with all listed documents.
- Diarise the expiry of an approval granted for up to three tax years.
- On a proposed rejection, insist on the hearing and the recorded reasons.
- For a plantation development account deposit, file Form No. 182.
- For a site restoration fund deposit, file Form No. 183.
Common mistakes
- Seeking approval for an employer-funded scheme.
- Taking a lump-sum corpus rather than periodical subscriptions.
- Applying to the employer's assessing Commissioner instead of the one where accounts are kept.
- Assuming approval continues after its stated tax years.
- Interchanging Forms No. 182 and 183.
- Treating the audit report as optional when the Schedule conditions the deduction on it.
Which year this governs
The Income-tax Rules, 2026 are made under the Income-tax Act, 2025. The 1962 parallels are rule 16C for rule 286, rule 5AC for rule 290 and rule 5AD for rule 291, given for tracing only. Verify the current text and form numbers before filing.