Rule 299 says that if recognition of a provident fund is withdrawn, the balance to each employee's credit at the end of the previous financial year is paid free of tax when received, subject to paragraph 9 of Part A of Schedule XI, and the rest of the accumulated balance is taxed as if the fund had never been recognised.
299
Rules 2026 · Rule 299
Exemption from tax when recognition withdrawn (recognised provident fund)
Rules 261-310
The rule. If the approving authority withdraws recognition from a provident fund, the balance to the credit of each employee at the end of the financial year before the withdrawal shall, subject to paragraph 9 of Part A of Schedule XI to the Act, be paid to him free of tax when he receives the accumulated balance due to him. The remaining accumulated balance due to him is subject to tax as if the fund had never been recognised.