300. Guideline for approval of programme of rural development required to be obtained for the purposes of deduction of expenditure by way of payment to associations/institutions for carrying out such programme

1. With a view to encouraging companies and co-operative societies to involve themselves in the work of rural development, the Finance (No. 2), Act, 1977 had introduced a new section 35CC, under which companies and co-operative societies are entitled to a deduction in the computation of the taxable profits of the expenditure incurred by them on any approved programme of rural development.

2. With a view to giving a further impetus to the programme of rural development, section 35CCA has been inserted through the Finance Act, 1978. Section 35CCA provides for the deduction, in the computation of the taxable profits, of expenditure incurred by a taxpayer engaged in a business or profession by way of payment of any sum, to an association or institution having the object of undertaking any programme of rural development, to be used for the purposes of carrying out such programme.  The deduction will, however, be admissible only in cases where the association or institution, as also the programme of rural development for which such sums are paid, have been approved by the “prescribed authority” notified by the Central Board of Direct Taxes.

3. [**                                                       **                                            **                                                                            **]

4. The programme of rural development for the purpose of this section has the same meaning as is assigned to it in section 35CC.  The expression “programme of rural development” has been defined in the Explanation below sub-section (1) of section 35CC to include any programme for promoting the social and economic welfare of, or the uplift of, the public in any rural area.

Areas falling outside local limits of specified municipalities and cantonment boards, which will not be regarded as “rural area”, have been specified in the notification issued by the Central Government on September 29, 1977 [Annex I]

5. Keeping in view the objective underlying this incentive and the requirements of the statutory provisions, the prescribed authority would consider according approval under section 35CCA to associations/institutions which satisfy the following requirements :

1. The association/institution should have as its object the undertaking of any programme of rural development.

2. The association/institution is—

( a)   constituted as a public charitable trust, or

( b)   registered under the Societies Registration Act, 1860, or under any law corresponding to that Act in force in any part of India, or

( c)   registered under section 25 of the Companies Act, 1956, or

( d)    a corporation established by or under a Central, State or Provincial Act.

3. The activities of the association/institution are open to citizens of India without distinction of religion, caste, creed, race, lingual group, etc., and are not expressed to be for the benefit of any particular individual or community.

4. The association or institution maintains regular accounts of its receipts and expenditure.

5. The instrument under which the association or institution is constituted does not, or the rules governing the association or institution do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the association or institution for any purpose other than a charitable purpose.

6. The association/institution has the necessary expertise and personnel for the efficient implementation of the programme of rural development.

7. The association/institution maintains a bank account.

6. Having regard to the objective underlying the tax incentive and the statutory requirements, the prescribed authority has evolved an illustrative list of categories of projects of rural development which would be considered by it for approval for the purposes of section 35CCA [Annex II].  It may be pointed out that this list is merely illustrative and not exhaustive and the items mentioned therein may be modified or supplemented in due course in the light of the different types of cases which come up for approval.

7. Some of the more important points which the applicants should keep in view while formulating schemes for rural development for approval under section 35CCA are given in Annex III .

8. The prescribed authority would consider for approval applications of the associations or institutions and their programme of rural development either separately or simultaneously.  Therefore, two separate forms of application have been devised.  Form at Annex IV(A) is to be used for seeking approval of the association/institution and form at Annex IV(B) for seeking approval of the specific programme of rural development.

9. It would facilitate prompt disposal of applications for approval under section 35CCA if six copies of the application giving information on the points indicated in Annex IV(A & B), duly signed and certified to be correct by a person authorised to sign the return of income of the applicant, are furnished together with three copies of a note setting out details of the programme of rural development for approval by the prescribed authority.

10. Applications for approval under section 35CCA along with relevant enclosures as stated above may be addressed to the Secretary, Central Board of Direct Taxes, Room No. 52, North Block, New Delhi-110001. One copy of the application along with the relevant enclosures should also be forwarded to the Chief Secretary of the concerned State or the officer nominated by him in this behalf.

Circular : No. 244 [F. No. 203/48/77-IT(A-II)], dated 13-7-1978.


[Not printed here; see independent entry at Sl. No. 299 on p. 1.1278 ante.]


1. Assistance in the setting up of rural industries in selected areas by the rural weak to provide them self-employment.

2. (a) Establishment, and ( b) running of dispensaries, maternity and child welfare centres and family welfare centres.

3. Nutrition programmes for school children.

4. (a) Establishment, and ( b) running of educational and vocational training centres.

5. (a) Construction, and ( b) maintenance of rural link roads, village streets, pavements and drainage.

6. (a) Construction, and ( b) maintenance of drinking water projects such as wells, tubewells, etc., and cleaning of wells and ponds.

7. Rural electrification, i.e., provision of street lighting in villages and electrification of Harijan/tribal homes.

8. Assistance to the weaker sections in constructing houses on sites provided in rural areas by Government, village panchayats, etc.

9. Minor irrigation schemes, including boring of tubewells and installation of pumping sets for the benefits of groups of small/marginal farmers.

10. Supply of improved varieties of seeds and provision of facilities for seed testing to groups of small/marginal farmers and assistance to such farmers for establishing seed farms.

11. Supply of fertilisers and insecticides to groups of small/marginal farmers and giving guidance and training to such farmers in the use of fertilisers, insecticides, etc.

12. Supply of plant protection equipment, sprayers, farm machinery, implements, etc., to the village panchayats for the use of groups of small/marginal farmers.

13. Animal husbandry—assisting the farmers in cattle improvement through establishment of veterinary dispensaries, artificial insemination centres, etc., dairy products processing and marketing,

14. Assistance to groups of small/marginal farmers, landless labourers, etc., in poultry farming, horticulture, pisciculture, etc.

15. Establishment of workshops for servicing and repair of farm machinery and training of artisans, mechanics, etc.


1. The benefit of the programme of rural development should flow to the public in general (as against individuals) in the rural area and not to the donor/association/institution.

2. The projects or schemes which the applicants may like to execute in the rural areas should be formulated keeping in view the local needs, resources of the community and the plans and programmes of the State Government for that area.

3. Ordinarily the approval of the association/institution and/or the programme to be executed will be for an initial period of one accounting year.  In case the programme extends beyond one accounting year, it may, in principle, be approved for the successive two years but a formal approval order will, however, be passed for each year separately if the prescribed authority is satisfied that the programme has been implemented properly. For this purpose, the prescribed authority may monitor the implementation of the programme. In no case approval will be granted for more than three years at a time.

4. The application for approval of the programme of rural development should contain complete details of the programme and indicate the rural area where the programme is to be executed.  The application should, in particular provide information in respect of the following :

l Particulars of the “rural area” (where programme is to be carried out) indicating the names of the villages, tehsil, district and State and evidence to show that it qualifies as “rural area” within the meaning of the expression as defined in clause (b) of the Explanation to sub-section (1) of section 35CC.

l The total period during which the programme is expected to be completed and the total monetary outlay involved.  Year-wise break-up of capital as well as revenue expenditure and the sources from which funds will be raised for the programme.

l If the programme is to be executed in different phases, the monetary outlay of each phase and its coverage.

l If the whole or part of the programme is to be executed on behalf of the applicant by any agent or contractor appointed by it, the name/address of such agent or contractor may be furnished indicating the nature of work to be executed by them and the remuneration to be paid to them.

l If the expenditure results in the acquisition or the creation of a capital asset, whether and, if so, at what stage and in what manner the applicant proposes to divest itself of the ownership of such assets?  Whether proper arrangements have been made for the continued maintenance of such assets?

l In regard to programmes which have to be executed on a long-term basis, like establishment of school or dispensary, what arrangements are proposed to be made for ensuring their continued maintenance?

l In case it is proposed to hand over the said establishments to the Central Government, State Government or any other agency, then a letter from the said Government/agency confirming that it would take over their programme should be furnished along with the application.

l Where the programme involves co-ordination and/or assistance by the State Government or any other agency, a letter from the State Government or, the agency to this effect should accompany the application.

l If a programme involves more than one activity, for instance, the programme of health services include running of dispensaries and child nutrition programmes, details of each such activity, mode of its execution and the budgetary provisions should be furnished separately.

l Where approval is sought for more than one programme, then the application should clearly bring out this fact and also indicate the full particulars of each of the programmes and the “rural areas” where such programmes are proposed to be implemented.

5. The approval of the prescribed authority for implementing the approved programme of rural development would be governed, inter alia, by the following conditions :

l The funds will be utilised for the purpose approved by the prescribed authority and that these would not be diverted for any other purpose.

l The representative of the prescribed authority has the right to visit the places where the approved programme is being carried out.

l The association/institution should maintain proper accounts of the receipts and payment, income and expenditure and the balance-sheet.  These accounts should be audited by a Chartered Accountant.

l The association/institution shall maintain proper records of all the assets created for the project and that these shall not be transferred or disposed of or mortgaged or utilised for purposes other than those for which these are purchased.

l The association/institution shall maintain a bank account.


1. Name and address of the applicant

2. Status – public trust/society/company, etc. (enclose a certified copy of the trust’s deed/certificate of registration and memorandum of association and any other document giving the object of the association/institution)

3. Residential status (whether resident/non-resident)

4. Name of District/Ward/Circle where assessed to income-tax and Permanent Account Number

5. Whether the applicant has been assessed to tax in the past? if so, copy of the latest assessment order may please be furnished

6. Whether the institution has been notified by the Central Government under section 10(23C)(iv) of the Income-tax Act? (Certified copy to be enclosed)

7. Whether the institution has been granted certificate under section 80G of the Income-tax Act by the Commissioner of Income-tax? (Certified copy to be enclosed)

8.  Nature of programmes and activities which have been implemented in the past by the applicant in the rural areas, indicating their location—village, block, district (enclose a copy of the annual report/ notes on the work done during the last year)

9. A list of main office bearers of the association/institution (enclose a copy of the statement giving names and addresses of the members of the Managing Committee/Board of Governors, etc.)

10. Yearly recurring expenditure of the organisation on rural development/welfare activities (enclose a copy of the certified statement of accounts including balance-sheet for the last year)
Place …………………………
Signature of the person authorized
Date ………………………….
to sign the return of income
Note : A copy of the application should be sent to the Chief Secretary or the officer authorised on his behalf (dealing with rural development) in the State in which the proposed project is going to be located and this fact should be indicated in the letter forwarding this application.


1. Name and address of the applicant

2. Whether approved as an association/institution under section 35CCA?  If so, quote number and date of the letter of the prescribed authority in this regard.  If not, whether a separate application for approval of the association/institution has been made to the prescribed authority ? (Give particulars).

3. Description of the rural area in which programme of rural development is proposed to be executed, indicating name of the village, block, tehsil/taluk, district and its distance from the nearest town/cantonment and whether the location of the programme is in “rural areas” as defined in the notification of September 28, 1977 (Annex I of the guidelines).

4. Details of the rural development programme proposed to be implemented by the applicant (Please annex a separate note).

5. Details of the facilities/resources available with the applicant, by way of necessary expertise, personnel, equipment, etc. for the efficient implementation of the programme.

6. Whether the applicant is in a position to execute the programme on its own or it would require assistance or co-ordination with some other private, public or government agency?  In the latter case, full particulars of agency and the scope of activities proposed to be assigned to it may be given.

7. The break-up of the expenditure on different items of the programme indicating the total outlay for a specified period.

8. If the applicant has received offers of donations of sums to be used for carrying out any approved programme of rural development, the names and addresses of such donors and the sums proposed to be contributed by them should be indicated.

9. Date on which a copy of the application along with relevant enclosures was forwarded to the Chief Secretary of the concerned State or the officer nominated by him.

10. Any other information to be given by the applicant.
Place …………………………
Signature of the person authorized
Date ………………………….
to sign the return of incom

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Category : Income Tax (28257)
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