Draft Income-tax Rule 37 Sets Strict Approval Process for Agricultural Extension Projects to Qualify Under Section 47(1)(a)
Rule 37 of the Draft Income-tax Rules, 2026 prescribes detailed guidelines for approval and notification of an Agricultural Extension Project under section 47(1)(a) of the Act. A project will qualify if it is undertaken for training, education, and guidance of farmers, has prior approval from the Ministry of Agriculture and Farmers Welfare, and involves expected expenditure exceeding ₹25 lakh, excluding land or building costs. Before commencing the project, the assessee must apply in Form No. 20 to the Member (IT), CBDT, along with the Ministry’s approval letter, a detailed project note, expenditure estimates, and expected completion date.
The Board may issue deficiency notices within one month of receipt and applicants must rectify defects within one month thereafter, failing which the application may be treated as invalid. If complete, the Board may notify the project in Form No. 21, published in the Official Gazette, for a period not exceeding three tax years, subject to Rule 38 conditions or other specified conditions. Renewal can be sought at least three months before expiry, and the Board may grant extension after obtaining a report from the jurisdictional Commissioner regarding compliance and activities.
The Board may revoke notification if activities cease, are not genuine, or violate statutory provisions or conditions, after granting an opportunity of hearing. Notifications, approvals, rejections, or cancellations must be communicated to relevant authorities, including the Ministry, jurisdictional Commissioner, State Agriculture Department, and the Agricultural Technology Management Agency.
Extract of Rule No. 37 of Draft Income-tax Rules, 2026
Rule 37
Guidelines for approval of Agricultural Extension Project under section 47(1)(a) of the Act
(1) The agricultural extension project (hereinafter referred as ‘project’) shall be considered for notification if it fulfils the following conditions, namely:—
(a) the project shall be undertaken by an assessee for training, education and guidance of farmers;
(b) the project shall have prior approval of the Ministry of Agriculture and Farmers Welfare, Government of India; and
(c) an expenditure (not being expenditure in the nature of cost of any land or building) exceeding the amount of twenty-five lakh rupees is expected to be incurred for the project.
(2) Before undertaking any project, an assessee shall make an application in Form No. 20 to the Member (IT), CBDT for notification of such project under Section 47(1)(a) of the Act.
(3) The application referred to in sub-rule (2) shall also be accompanied by:-
(a) a letter approving the project and specifying the amount of expenditure expected to be incurred on the project, from the Ministry of Agriculture and Farmers Welfare, Government of India;
(b) a detailed note on the agricultural extension project to be undertaken by the assessee; and
(c) details of the expenditure expected to be incurred on the project and expected date of completion of the project.
(4) Where any defect is noticed in the application referred to in sub-rule (2) or a relevant document is not attached thereto, the Board shall, before the expiry of one month from the end of the month in which the application is received in its office, intimate the defect to the applicant for its rectification.
(5) The applicant shall remove the defect within a period of one month form the end of the month in which intimation letter is served on him.
(6) Where the applicant fails to remove the deficiency within the period mentioned in sub-rule (5), the Board shall, within one month from the time period specified in sub-rule (5), pass an order treating the application as invalid.
(7) If the application is complete in all respects, the Board shall, within two month from the end of the quarter in which it receives such application, issue under Section 47(1)(a), a notification in Form No. 21 to be published in Official Gazette specifying the project, subject to the conditions mentioned in rule 38 or such other conditions, as it may deem fit, to be effective for such period not exceeding three tax years.
(8) The assessee, may, at least three months before the expiry of the effective period of the notification issued under sub-rule (7), make an application to the Board for notification of such project for a further period.
(9) The Board shall, after receiving the application under sub-rule (8), call for a report from the Commissioner of Income-tax, having jurisdiction over the case regarding the activities of the project during the period of notification and fulfilment of conditions mentioned in rule 38 including any other conditions, if any, subject to which the project was notified under sub-rule (7).
(10) On being satisfied with the report received under sub-rule (9) on the project, the Board may, within two months from the end of the quarter in which it receives application referred to in sub-rule (8), notify the said project for a further period not exceeding three tax years.
(11) The Board may, on being satisfied that––
(a) the assessee has ceased its activities, or that its activities are not genuine; or
(b) its activities are not being carried out in accordance with all or any of the relevant provisions of this rule or rule 38; or
(c) its activities are not being carried out in accordance with all or any of the conditions subject to which the notification was issued,
pass an order for revocation of the notification issued under sub-rule (7) or sub-rule (10) after providing an opportunity of being heard.
(12) A copy of notification, approval, rejection, or cancellation shall be communicated to:
(a) The applicant;
(b) The Ministry of Agriculture and Farmers Welfare, Government of India;
(c) The Commissioner of Income-tax having jurisdiction over the applicant;
(d) The Department of Agriculture of the concerned State;
(e) The Agricultural Technology Management Agency of the concerned district.
