Rule 36 — Procedure for notification of an affordable housing project as a specified business under section 46(11)(d)(vii) and a semi-conductor wafer fabrication manufacturing unit as a specified business under section 46(11)(d)(xiii). Made under s.46 of the Income-tax Act, 2025.
Rule 36 gives effect to Section 46 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) requires the applicant to apply for notification of an affordable housing project as a specified business under section 46(11)(d)(vii) in Form No. 18, or of a semiconductor wafer fabrication manufacturing unit as a specified business under section 46(11)(d)(xiii) in Form No. 19.
Sub-rule (2) sets the procedure. The application goes to Member (IT), Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, New Delhi. If a defect is noticed or a required document is not attached, a deficiency letter may be served, and the applicant must remove the deficiency within one month from the end of the month in which the letter is served; on failure, the Board, if satisfied, may pass an order treating the application as invalid. The Board may call for details, documents or information from the applicant and from income-tax authorities and other Departments or agencies before granting approval, and may issue the notification granting approval or reject the application after recording reasons in writing. The Board may withdraw approval if satisfied that the assessee has ceased its activities relating to the specified business, or that the activities are not genuine or are not being carried out in accordance with the conditions under section 46 or under this rule; and in the case of a unit, if the approval granted by the competent authority on the recommendations of the Appraisal Committee under the Modified Special Incentive Package Scheme of the Department of Electronics and Information Technology has been withdrawn. An opportunity of being heard must be given before an order invalidating or rejecting the application, or withdrawing the approval or cancelling the notification, is passed, and a copy of the order is communicated to the applicant, the Assessing Officer and the Commissioner having jurisdiction.
Sub-rule (3) requires the applicant to maintain separate books of account with complete details of all capital expenditure incurred during the tax year for which the deduction under section 46 is intended to be claimed, and to file the relevant income-tax returns by the due date. Sub-rule (4) provides that a project or unit once notified continues to be governed by this rule to the extent it is not in contravention of the Act.
Sub-rule (5) sets the conditions for a project: prior sanction of the competent authority empowered under the Scheme of Affordable Housing in Partnership framed by the Ministry of Housing and Urban Affairs; commencement of operations on or after the 1st April, 2011; a plot of land with a minimum area of one acre, with the affordable housing units comprising at least 30% of the total allocable rentable area for the Economically Weaker Section category, 60% for Economically Weaker Section and Lower Income Group categories together, and 90% for Economically Weaker Section, Lower Income Group and Middle Income Group categories together; the remaining 10% or less may comprise other residential or commercial units; the design, layout and specifications must be approved by the State Government or Union territory Administration or its designated implementing agency; and the project must be completed within five years from the end of the tax year in which it is sanctioned.
Sub-rule (6) sets the conditions for a unit: it must be exclusively for the manufacture of semi-conductor wafer fabrications; it must have prior approval of the competent authority on the recommendations of the Appraisal Committee under the Modified Special Incentive Package Scheme notified by the Department of Electronics and Information Technology; commercial production must commence on or after the 1st April, 2014; and it may have one or more manufacturing facilities, but all of them must be located in India.
Sub-rule (7) defines the terms used in sub-rule (5), including a table of rentable areas for the affordable housing unit categories — Economically Weaker Section up to 25 square metres in specified cities and up to 30 in other cities, Lower Income Group greater than 25 and up to 50 in specified cities and greater than 30 and up to 60 in other cities, and Middle Income Group greater than 50 and up to 70 in specified cities and greater than 60 and up to 85 in other cities — and defines "date of commencement of operations", "housing unit", "project", "rentable area" by reference to is 3861:2002, "specified cities", and "total allocable rentable area". Sub-rule (8) defines the terms used in sub-rule (6), including "competent authority", "date of commencement of operations", "semi-conductor wafer fabrications" by reference to the National Industrial Classification, 2008 sub-class 26103, and "unit".
Section 46(11)(d)(vii) and (xiii) admit an affordable housing project and a semi-conductor wafer fabrication manufacturing unit to the list of specified businesses only once they are notified, and the Act does not say how notification is obtained or what a project or unit must look like to deserve it. This rule supplies both: the application, the deficiency and hearing procedure and the power to withdraw on one side, and the physical and scheme-linked conditions — plot size, category mix, completion period, approvals under other Government schemes — on the other. Sub-rule (3) exists because the deduction under section 46 runs on capital expenditure, which has to be traceable to the notified project or unit.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Time to remove a deficiency in the application | One month from the end of the month in which the deficiency letter is served | Failure allows the Board, if satisfied, to treat the application as invalid | Sub-rule (2)(c) and (d) |
| Earliest date of commencement of operations for a project | On or after the 1st April, 2011 | Date of commencement is the date the project is sanctioned by the competent authority under the Scheme of Affordable Housing in Partnership | Sub-rule (5)(b) with sub-rule (7)(b) |
| Minimum plot area for a project | One acre | The project must be on a plot of land of at least this area | Sub-rule (5)(c) |
| Minimum share of total allocable rentable area for the Economically Weaker Section category | 30% | Of the total allocable rentable area of the project | Sub-rule (5)(c)(i) |
| Minimum share for Economically Weaker Section and Lower Income Group categories together | 60% | Of the total allocable rentable area of the project | Sub-rule (5)(c)(ii) |
| Minimum share for Economically Weaker Section, Lower Income Group and Middle Income Group categories together | 90% | Of the total allocable rentable area of the project | Sub-rule (5)(c)(iii) |
| Maximum share for other residential or commercial units | 10% or less | The remaining part of the total allocable rentable area | Sub-rule (5)(d) |
| Period for completing the project | Five years from the end of the tax year in which the project is sanctioned by the competent authority | Sanction under the Scheme of Affordable Housing in Partnership referred to in sub-rule (5)(a) | Sub-rule (5)(f) |
| Earliest date of commencement of commercial production for a unit | On or after the 1st April, 2014 | Date of commencement of operations is the date commercial production of the unit commences | Sub-rule (6)(c) with sub-rule (8)(b) |
| Rentable area of an Economically Weaker Section housing unit | Up to 25 square metres in specified cities; up to 30 square metres in other cities | Categories of affordable housing units for sub-rule (5) | Sub-rule (7)(a), Table |
| Rentable area of a Lower Income Group housing unit | Greater than 25 and up to 50 square metres in specified cities; greater than 30 and up to 60 square metres in other cities | Categories of affordable housing units for sub-rule (5) | Sub-rule (7)(a), Table |
| Rentable area of a Middle Income Group housing unit | Greater than 50 and up to 70 square metres in specified cities; greater than 60 and up to 85 square metres in other cities | Categories of affordable housing units for sub-rule (5) | Sub-rule (7)(a), Table |
| Verandah area counted in rentable area | 50% of unglazed verandah and 100% of glazed verandah | Carpet area at any floor level measured in accordance with is 3861:2002 | Sub-rule (7)(e) |
Notification is not a formality that follows the application; the Board may call for information from other Departments and agencies before granting it and may reject with reasons. The category percentages in sub-rule (5)(c) are cumulative bands measured on total allocable rentable area, not on the number of units: 30% must be Economically Weaker Section, 60% Economically Weaker Section and Lower Income Group together, and 90% those two with Middle Income Group, leaving 10% or less for anything else. Whether a unit falls in a category is decided by the rentable area table in sub-rule (7)(a), and the same floor area places a unit in different categories in specified cities and other cities. Approval is not permanent: sub-rule (2)(g) lets the Board withdraw it where the activities stop or are not genuine or not carried out in accordance with section 46 or this rule, and sub-rule (2)(h) lets it withdraw the approval of a unit when the underlying Modified Special Incentive Package Scheme approval is withdrawn — in either case only after an opportunity of being heard under clause (i).
A company obtains sanction for an affordable housing project in the tax year 2026-27 on a plot of 1.5 acres in a specified city. Of a total allocable rentable area of 10,000 square metres, it allots 3,200 square metres to units of up to 25 square metres, 3,000 to units above 25 and up to 50 square metres, and 3,100 to units above 50 and up to 70 square metres, leaving 700 square metres for commercial space. The Economically Weaker Section share is 32%, the Economically Weaker Section and Lower Income Group share is 62% and the three categories together are 93%, so sub-rule (5)(c) is satisfied and the commercial space is within the 10% allowed by clause (d); under clause (f) the project must be completed within five years from the end of the tax year 2026-27.
In the Form No. 18 or Form No. 19 application to Member (IT) of the Board and in the notification, deficiency letter or withdrawal order that follows; afterwards, in the separate books of capital expenditure the assessee must keep to support the deduction claimed under section 46 in the return.
the applicant shall remove the deficiency within one month from the end of the month in which such deficiency letter is served
the project shall be completed within a period of five years from the end of the tax year in which the project is sanctioned by the competent authority mentioned in clause (a)
the unit may have one or more manufacturing facilities, but all the facilities shall be located in India