Draft Income Tax Rule 288 – Guidelines for setting up an Infrastructure Debt Fund for the purpose of exemption under Schedule VII [Table: Sl. No. 46] of the Act
Rule 288 of the Draft Income-tax Rules, 2026 provides guidelines for establishing an Infrastructure Debt Fund (IDF) for claiming exemption under Schedule VII (Table: Sl. No. 46). The rule requires the IDF to be set up as a Non-Banking Financial Company that complies with the regulatory framework of the Reserve Bank of India. The fund may invest only in infrastructure projects that have completed at least one year of satisfactory commercial operations after commencement or in toll-operate-transfer projects where it acts as a direct lender. The rule permits the fund to raise capital through rupee-denominated bonds, foreign currency bonds, zero coupon bonds, or external commercial borrowings, subject to conditions such as compliance with RBI and FEMA regulations and a minimum maturity or borrowing tenor of five years for non-resident investments and external borrowings. Investments by the fund in a single project or group of projects must not exceed 20% of the fund’s corpus. The rule also prohibits investment in projects where a specified shareholder, associated enterprise, or group of such shareholder has a substantial interest. The Infrastructure Debt Fund must file its return of income under section 263(1)(a) on or before the due date. If the fund fails to comply with the conditions of the rule or RBI directions, it will not be treated as an Infrastructure Debt Fund for the purposes of the Act. The rule further defines terms such as associated enterprise, concern, corpus, group, substantial interest, relative, and specified shareholder.
Extract of Rule No. 288 of Draft Income-tax Rules, 2026
Rule 288
Guidelines for setting up an Infrastructure Debt Fund for the purpose of exemption under Schedule VII [Table: Sl. No. 46] of the Act.
(1) The Infrastructure Debt Fund shall be set up as a Non-Banking Financial Company conforming to and satisfying the conditions laid down in the regulatory framework provided by the Reserve Bank of India.
(2) The funds of the Infrastructure Debt Fund shall be invested only in, —
(a) post commencement operation date infrastructure projects which have completed at least one year of satisfactory commercial operations; or
(b) toll-operate-transfer projects as the direct lender.
(3) The Infrastructure Debt Fund shall raise the funds in the manner prescribed in column B of the Table below subject to the conditions mentioned in column C thereof:
TABLE
| Sl. No. | Manner of raising funds |
Conditions |
| A | B | C |
| 1 | issue rupee denominated bonds or foreign currency bonds |
(a) such bonds must be in accordance with the directions of Reserve Bank of India and the relevant regulations under the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000, as amended from time to time;(b) In case of an investor in the aforesaid bond being a non-resident, the original or initial maturity of bond, at time of first investment by such non-resident investor, shall not be less than a period of five years |
| 2 | issue zero coupon bonds | (a) such bonds should be in accordance with rule 7.
(b) as mentioned in clause (b) column C of Sl. No. 1. |
| 3 | raise funds through loan route under external commercial borrowings | (a) the said external commercial borrowings shall be in accordance with the directions of the Foreign Exchange Department of the Reserve Bank of India.
(b) the tenor shall not be less than a period of five years and such borrowings shall not be sourced from foreign branches of Indian banks. |
(4) The investment made by the Infrastructure Debt Fund in an individual project or project belonging to a group at any time, shall not exceed twenty per cent of the corpus of the fund.
(5) No investment shall be made by the Infrastructure Debt Fund in any project where its specified shareholder or the associated enterprise or the group of such specified shareholder has a substantial interest.
(6) The Infrastructure Debt Fund shall file its return of income as required by section 263(1)(a) on or before the due date.
(7) In case the Infrastructure Debt Fund does not fulfil any of the conditions provided in this rule or directions of the Reserve Bank of India, all provisions of the Act shall apply as if it is not an Infrastructure Debt Fund referred to in Schedule VII [Table: Sl. No. 46].
(8) In this rule, —
(a) “associated enterprise” shall have the same meaning as assigned to it in section 162;
(b) “concern” shall have the same meaning as defined under section 2(40);
(c) “corpus” means the total funds of the Infrastructure Debt Fund raised for the purpose of investment;
(d) “group” means a group as defined in section 2(mm) of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996;
(e) a person shall be deemed to have substantial interest in —
(i) a company if he is the beneficial owner (including beneficial ownership held by one or more of his relatives, in case the person is an individual) of shares (not being the shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than 10 per cent of the voting power; or
(ii) a concern other than a company if he is, at any time during the tax year, beneficially entitled to not less than 20 per cent of the income of such concern;
(f) “relative”, in relation to an individual, means—
(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the persons referred to in sub-clauses (ii) to (vi); or
(viii) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual;
(g) “specified shareholder” means a non-banking financial company, or a bank, or any other person holding, directly or indirectly, shares carrying not less than thirty per cent of the voting power in Infrastructure Debt Fund.
