Draft Income Tax Rule 36 – Guidelines for Notification of Affordable Housing Projects under Section 46(11)(d)(vii) and Semiconductor Wafer Fabrication Units under Section 46(11)(d)(xiii)

Rule 36 of the Draft Income-tax Rules, 2026 lays down the guidelines and procedure for notification of an affordable housing project under section 46(11)(d)(vii) and a semiconductor wafer fabrication manufacturing unit under section 46(11)(d)(xiii) as specified businesses. Applications must be filed in Form No. 18 (for projects) or Form No. 19 (for units) with the Member (IT), CBDT. Deficiencies must be rectified within one month, failing which the application may be treated as invalid. The Board may seek additional information, grant notification through publication in the Official Gazette, reject with reasons, or withdraw approval if activities cease, are not genuine, or violate prescribed conditions. Separate books of account for capital expenditure must be maintained, and returns must be filed on time to claim deductions.

For affordable housing projects, prior sanction under the Scheme of Affordable Housing in Partnership is mandatory, with commencement on or after 1 April 2011. Projects must be on at least one acre of land and meet prescribed percentages of Economically Weaker Section (EWS), Lower Income Group (LIG), and Middle Income Group (MIG) units, with completion within five years. Definitions of rentable area, specified cities, and housing units are provided.

For semiconductor units, the facility must exclusively manufacture semiconductor wafer fabrications, have prior approval under the Modified Special Incentive Package Scheme, commence production on or after 1 April 2014, and operate entirely in India. The rule continues to govern notified entities subject to consistency with the Act.

Extract of Rule No. 36 of Draft Income-tax Rules, 2026

Rule 36

Guidelines for notification of an affordable housing project as a specified business under section 46(11)(d)(vii) and a semiconductor wafer fabrication manufacturing unit as a specified business under section 46(11)(d)(xiii) of the Act.

(1) The applicant shall apply for notification of––

(a) an affordable housing project (hereinafter “the project”) as a specified business under section 46(11)(d)(vii) of the Act, in Form No. 18;

(b) a semiconductor wafer fabrication manufacturing unit (hereinafter “the unit”) as a specified business under section 46(11)(d)(xiii) of the Act, in Form No. 19.

(2) The notification mentioned in sub-rule (1) shall be in accordance in with the following procedure, namely:––

(a) the person shall apply for notification of the project or the unit in Form No. 18 or Form No. 19, as the case may be, to Member (IT), Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, New Delhi;

(b) if any defect is noticed in the application or if any relevant document, as required is not attached, a deficiency letter may be served on the applicant;

(c) the applicant shall remove the deficiency within one month from the end of the month in which such deficiency letter is served;

(d) where the applicant fails to remove the deficiency within the period specified in clause (c), the Board, if satisfied, may pass an order treating the application as invalid;

(e) the Board may, before granting approval, call for such details, documents or information from the applicant as well as from the income-tax authorities and other Departments or agencies, as it may deem fit;

(f) the Board may issue the notification to be published in the Official Gazette granting approval to the project or the unit, as the case may be, or reject the application, after recording the reasons for rejection in writing;

(g) the Board may withdraw the approval in the case of a project or a unit, if it is satisfied that:––

(i) the assessee has ceased its activities relating to the specified business; or

(ii) such activities are not genuine or are not being carried out in accordance with all or any of the conditions under section 46 or under this rule;

(h) the Board may also withdraw the approval in respect of a unit under section 46(11)(d)(xiii) of the Act, if it is satisfied that 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.

(i) an opportunity of being heard shall be given to the applicant, if an order invalidating or rejecting the application or withdrawing the approval or cancellation of the notification, were to be passed;

(j) a copy of order mentioned in clause (i) shall be communicated to the applicant as well as the Assessing Officer and the Commissioner having jurisdiction over the applicant;

(3) The applicant mentioned in sub-rule (1) shall maintain separate books of account with complete details of all capital expenditure incurred during the tax year for which it intends to claim the said deduction under section 46 of the Act and shall file the relevant income-tax returns by the due date to avail the tax benefit under section 46 of the Act.

(4) A project notified under section 46(11)(d)(vii) of the Act or a unit notified under section 46(11)(d)(xiii) of the Act, as the case may be, shall continue to be governed by the provisions of this rule to the extent it is not in contravention with the provisions of the Act, as amended from time to time.

(5) A project shall be considered for notification under section 46(11)(d)(vii), if it fulfills all of the following conditions, namely:––

(a) the project shall have prior sanction of the competent authority empowered under the Scheme of Affordable Housing in Partnership framed by the Ministry of Housing and Urban Affairs, Government of India;

(b) the date of commencement of operations of the project, being the date on which the project is sanctioned by the competent authority empowered under the Scheme of Affordable Housing in Partnership framed by the Ministry of Housing and Urban Affairs, Government of India, shall be on or after the 1st day of April 2011;

(c) the project shall be on a plot of land with a minimum area of one acre and out of the total allocable rentable area of the project, the affordable housing units shall comprise of at least , –

(i) 30% for Economically Weaker Section (EWS) category;

(ii) 60% for Economically Weaker Section (EWS) and Lower Income Group (LIG) categories; and

(iii) 90% for Economically Weaker Section (EWS), Lower Income Group (LIG) and Middle Income Group (MIG) categories;

(d) the remaining ten per cent or less of the total allocable rentable area of the project may comprise of other residential or commercial units;

(e) the design, layout and specifications of the project to be developed and built shall be approved by the State or Union territory Government or its designated implementing agency;

(f) 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).

(6) A unit shall be considered for notification under section 46(11)(d)(xiii), if it fulfills all of the following conditions, namely:––

(a) the unit shall be exclusively for the manufacture of semiconductor wafer fabrications;

(b) the unit shall have prior approval of the competent authority on the recommendations of Appraisal Committee under the Modified Special Incentive Package Scheme notified by the Department of Electronics and Information Technology, Ministry of Communications and Information Technology, Government of India;

(c) the date of commencement of operations, being the date on which the commercial production of the unit commences, shall be on or after the 1st day of April 2014;

(d) the unit may have one or more manufacturing facilities, but all the facilities shall be located in India.

(7) For the purposes of sub-rule (5),––

(a) “affordable housing units” shall be of the following categories:

(b) “date of commencement of operations” means the date on which the project is sanctioned by the competent authority empowered under the Scheme of Affordable Housing in Partnership framed by the Ministry of Housing and Urban Affairs, Government of India, for a project to be considered for notification under section 46(11)(d)(vii) of the Act.

(c) “housing unit” means an independent residential unit with separate facilities for living, cooking and sanitary requirements, distinctly separated from other residential units within the building – (i) directly accessible from an outer door or through an interior door in a shared hallway and not by walking through another household’s living space and (ii) excluding any shared dining areas;

(d) “project” means an affordable housing project;

(e) “rentable area” means the carpet area at any floor level, including the carpet area of kitchen, pantry, store, lavatory, bathroom, fifty per cent of unglazed verandah and hundred per cent of glazed verandah, in accordance with the provisions of the Indian Standard – Method of Measurement of Plinth, Carpet and rentable Areas of Buildings, IS 3861:2002, formulated and published by the Bureau of Indian Standards;

(f) “specified cities” shall mean –

(i) the urban agglomerations comprising of the area included on the basis of the latest census, of Greater Mumbai, Delhi, Kolkata, Chennai, Hyderabad, Bangalore, Ahmedabad;

(ii) Districts of Faridabad, Gurgaon, Gautham Budh Nagar, Ghaziabad, Gandhinagar; and

(iii) City of Secunderabad;

(g) “total allocable rentable area” means the total rentable area of all the proposed housing units or non-housing units but excluding the areas earmarked for common facilities and services.

(8) For the purposes of sub-rule (6),––

(a) “Competent authority” means the authority approving the unit under the Modified Special Incentive Package Scheme notified by the Government of India, Ministry of Communications and Information Technology, Department of Electronics and Information Technology;

(b) “date of commencement of operations” means the date on which the commercial production of the unit commences;

(c) “semiconductor wafer fabrications” means integrated circuits which are covered in the National Industrial Classification, 2008 under Division 26; Group 261; Class 2610; Sub-class 26103;

(d) “Unit” means a manufacturing facility for semiconductor wafer fabrications.