Rule 34 — Conditions subject to which approval is to be granted to a University, college or other institution for deduction for expenditure on scientific research under section 45(4) read with section 45(3)(a). Made under s.45 of the Income-tax Act, 2025.
Rule 34 gives effect to Section 45 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
The rule sets the conditions subject to which approval is granted to a University, college or other institution under section 45(4) read with section 45(3)(a), and the reporting that follows from approval.
Sub-rule (1) requires the sum paid to the institution to be used for scientific research and research in social science or statistical research. Sub-rule (2) requires the applicant institution to carry out that research through its faculty members or its enrolled students.
Sub-rule (3) imposes four obligations on an institution approved under section 45(4)(b): to maintain separate books of account in respect of the sums received for research; to reflect in them the amount used for carrying out research; to get those books audited by an accountant as defined in section 515(3)(b); and to furnish the report of that audit, duly signed and verified by the accountant, to the Commissioner of Income-tax having jurisdiction over the case by the due date of furnishing the return of income under section 263(1). Sub-rule (4) adds a separate statement of donations received and the amount used for research, a copy of it certified by the auditor accompanying the audit report.
Sub-rule (5) requires a further statement to the Commissioner of Income-tax by the same due date, containing a detailed note on the research work undertaken during the tax year, a summary of research articles published in national or international journals during the tax year, any patent or other similar rights applied for or registered during the tax year, and the programme of research projects to be undertaken during the forthcoming tax year with the financial allocation for that programme.
Sub-rule (6) deals with failure. If the Commissioner of Income-tax finds that the institution is not maintaining separate books of account for research activities, has failed to furnish its audit report, has not furnished its statement of sums received and used for research or the statement under sub-rule (5), has ceased to carry on its research activities or its activities are not genuine, or is not fulfilling the conditions subject to which approval was granted, he may, after making appropriate enquiries, furnish a report on those circumstances to the Central Government within six months from the date of furnishing the return of income under section 263(1).
Section 45 allows a deduction to the payer for a sum paid to an approved institution, so the money leaves the tax base at the moment of payment and the research it is meant to fund happens elsewhere and later. The rule is what keeps the two connected: the sum must be used for research, the research must be done by the institution's own faculty or enrolled students, and the books, the audit, the donations statement and the annual research statement let the Commissioner see that it was. Sub-rule (6) supplies the route by which a failure reaches the Central Government, which granted the approval.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Time to furnish the audit report to the Commissioner of Income-tax | By the due date of furnishing the return of income under section 263(1) | Report duly signed and verified by the accountant, accompanied by the certified statement of donations | Sub-rules (3)(d) and (4) |
| Time to furnish the annual research statement to the Commissioner of Income-tax | By the due date of furnishing the return of income under section 263(1) | Statement containing the four items listed in sub-rule (5) | Sub-rule (5) |
| Time for the Commissioner of Income-tax to report a failure to the Central Government | Within six months from the date of furnishing the return of income under section 263(1) | After making appropriate enquiries into any of the circumstances in clauses (a) to (e) | Sub-rule (6) |
Two documents are due on the same date and they are not the same document: the audit report under sub-rule (3)(d), with the auditor-certified statement of donations attached under sub-rule (4), and the research statement under sub-rule (5). Both go to the Commissioner of Income-tax having jurisdiction, not to the Central Government that granted the approval. Sub-rule (2) restricts how the research may be done — through the institution's own faculty members or enrolled students — so outsourcing the research while keeping the funding does not answer the rule. Sub-rule (6) is permissive as to the Commissioner's report ("he may") but the grounds are wide, and they include the purely procedural ones of not maintaining separate books or not furnishing the audit report, so a lapse in record-keeping can start the same process as a finding that the activities are not genuine. What the report leads to is not stated in the rule; the rule takes it as far as the Central Government.
An approved college receives Rs 2 crore of research donations in a tax year and spends Rs 1.4 crore of it on a statistical research project run by its own faculty. It keeps separate books for those sums, has them audited by an accountant as defined in section 515(3)(b), and by the section 263(1) due date sends the Commissioner of Income-tax the signed audit report with the auditor-certified statement of donations, together with the sub-rule (5) statement setting out the project, the papers published, a patent applied for during the year and next year's research programme with its financial allocation. If the college had instead engaged an outside laboratory to do the work, sub-rule (2) would not be satisfied even though the money was spent on research.
The institution meets it every year, in the audit report, the certified donations statement and the research statement filed with the Commissioner of Income-tax by the section 263(1) due date. A donor claiming the deduction never files under this rule, but the continuing validity of the approval it relies on depends on the institution doing so.
The applicant University, college or other institution shall carry out scientific research, research in social science or statistical research through its faculty members or its enrolled students.
furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under section 263(1)