Rules 311 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.
Six one-sentence rules make three events in the life of an approved fund depend on the prior approval of the approving authority: closing the employer's business, winding up or amalgamating the fund, and altering its rules. Rules 311, 312 and 314 apply to superannuation funds; rules 325, 326 and 328 apply to gratuity funds. This article reads them as per the Income-tax Rules, 2026 (G.S.R. 198(E), notified on 20 March 2026), read with the amending notifications issued up to 22 September 2026. Later notifications should be checked.
In each set, the trustees or the fund cannot act without the prior approval of the approving authority, who may impose conditions. On closure of the employer's business, trustees must make arrangements for annuities (superannuation) or gratuity (gratuity fund). On winding up or amalgamation of the fund, and on any alteration of rules, constitution, objects or conditions, approval is needed first. None of the six rules names a form.
Where the rules sit
None of the six rules names a provision of the Act. They belong to the groups of rules for approved superannuation funds and approved gratuity funds, which are made for Part B of Schedule XI to the Income-tax Act, 2025: rules 301 and 316 define the terms for rules 302 to 315 and 317 to 329 by reference to Part B, and rules 313 and 327 name paragraph 4(1) of that Part. The Schedule is explained in our article on Schedule XI on approved superannuation funds and gratuity funds.
Both sets use the same definition of "approving authority", in rules 301(a) and 316(a): the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. A "fund" in the superannuation set means a superannuation fund, or a part of one, including a fund established with the sole purpose of paying pension or family pension by the employer to employees; in the gratuity set it means a gratuity fund. "Trust" and "trustee" refer to the trust under which the fund is established. A "beneficiary" is a person referred to in paragraph 3(b) of Part B for whom provision of annuity (superannuation set) or gratuity (gratuity set) is made.
Our existing articles on the neighbouring rules are rules 309, 310, 313 and 315 on superannuation protections, approval and appeal, rules 323, 324, 327 and 329 on gratuity fund charge, winding up and approval, rules 301, 302 and 304 on the superannuation fund trust and trustees and rules 316, 317 and 320 on the gratuity fund trust and trustees. For help with a fund's trust deed or closure, speak to our legal consultation team.
The two sets side by side
| Event | Superannuation fund | Gratuity fund |
|---|---|---|
| Closure of the employer's business | Rule 311: when the business of the employer is to be closed or discontinued, the trustees shall, with the prior approval of and subject to the conditions imposed by the approving authority, make suitable arrangements for providing annuities to current employees, or to their widows, children or dependents in the event of their death | Rule 325: where the trade or undertaking of the employer is to be wound up or discontinued, the trustees shall, with the prior approval of, and subject to such conditions as may be imposed by, the approving authority, make satisfactory arrangements for the payment of gratuity to the existing beneficiaries |
| Winding up or amalgamation of the fund | Rule 312: any arrangements for the winding up of the fund or its amalgamation with another fund are subject to the prior approval of, and such conditions as may be imposed by, the approving authority | Rule 326: the same words |
| Alteration of the fund | Rule 314: no alteration in the rules, constitution, objects or conditions of an approved fund without the prior approval of the approving authority | Rule 328: the same words |
Where the two sets differ in wording
Rules 312 and 326 are the same in substance, as are rules 314 and 328. The differences are in the closure rules, 311 and 325.
| Point | Rule 311 (superannuation) | Rule 325 (gratuity) |
|---|---|---|
| Trigger | "business of the employer" closed or discontinued | "trade or undertaking of the employer" wound up or discontinued |
| Arrangements | "suitable" | "satisfactory" |
| What is provided | Annuities | Payment of gratuity |
| Who benefits | Current employees, or their widows, children or dependents in the event of death | Existing beneficiaries |
The rules do not define "suitable" or "satisfactory", and they do not say what the approving authority will treat as adequate. That is left to the approval itself and to the conditions imposed.
Rules 311 and 325: closure of the employer's business
The duty falls on the trustees, not on the employer. They must make arrangements, and they must have the approving authority's prior approval, with conditions. The rules print no form, no time limit and no consequence for acting without approval; the Schedule and the terms of the approval should be checked. The approval must come first: the word "prior" is in each rule.
The superannuation rule speaks of annuities to current employees or, on death, their widows, children or dependents. The gratuity rule speaks of payment of gratuity to the existing beneficiaries, who are the persons for whom provision of gratuity is made under paragraph 3(b) of Part B.
Rules 312 and 326: winding up or amalgamation
"Any arrangements" for winding up the fund, or for amalgamating it with another fund, are subject to the approving authority's prior approval and conditions. The rule is about the fund; the earlier pair is about the business. Both can arise together if a business closes and its fund is to be wound up, in which case both approvals are needed on the words of the rules.
Rules 314 and 328: alteration
No alteration in the rules, constitution, objects or conditions of an approved fund may be made without the prior approval of the approving authority. Four things are covered: the rules of the fund, its constitution, its objects and its conditions. The rule does not distinguish major from minor changes, so a trust deed amendment, a change of trustees' powers or a change of object each falls on the face of the words within the approval requirement.
Example. Sunrise Engineering Limited (invented) decides to close its plant. Its approved superannuation fund and approved gratuity fund each have trustees. Before the plant closes, the superannuation trustees must obtain the approving authority's prior approval to arrangements for annuities for current employees and their dependents (rule 311), and the gratuity trustees must obtain approval to arrangements for payment of gratuity to existing beneficiaries (rule 325). If the company then wants to merge the superannuation fund into the funds of a group company, that amalgamation needs prior approval (rule 312). If the gratuity fund's trust deed is to be amended to change its objects, rule 328 requires approval before the change.
Who is affected
| Person | Effect |
|---|---|
| Trustees of an approved superannuation or gratuity fund | Cannot make closure arrangements, wind up, amalgamate or alter the fund without prior approval |
| Employer | Closure of its business triggers the trustees' duty |
| Employees, widows, children, dependents and gratuity beneficiaries | Their annuities or gratuity are what the arrangements must provide |
| Approving authority | Grants approval and imposes conditions |
Need help with a fund closure or amendment?
Where a business is closing or a fund is being merged or restated, the order of steps matters because approval comes first. Our legal consultation team can help trustees and employers plan the approval request and the arrangements.
Key takeaways
- Rules 311, 312 and 314 apply to approved superannuation funds; rules 325, 326 and 328 to approved gratuity funds.
- Closure of the employer's business needs prior approval of the approving authority for the arrangements made by the trustees.
- Winding up or amalgamation of the fund needs prior approval and is subject to conditions.
- Any alteration in the rules, constitution, objects or conditions needs prior approval.
- The approving authority is the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner.
- None of the six rules names a form, a time limit or a consequence.
Read next
- Rules 309, 310, 313 and 315: superannuation protections, approval and appeal
- Rules 323, 324, 327 and 329: gratuity fund charge, winding up and approval
- Rules 51 and 143: original fund condition and investment division
- Rules 258, 259, 263, 264, 266 and 267: practitioner certificate and inquiry
Disclaimer: Based on the Income-tax Rules, 2026 (G.S.R. 198(E), notified on 20 March 2026), read with the amending notifications issued up to 22 September 2026, as consulted on 2 October 2026. It explains the words of the rules and forms only; later notifications, the forms and utilities on the e-filing portal, circulars and the way the tax authorities apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.