Rule 39 of the Draft Income-tax Rules, 2026 prescribes guidelines for approval of Skill Development Projects under section 47(1)(b) of the Act. A project will be considered for notification only if it is undertaken by an eligible company and carried out in a separate facility within a training institute. Before commencing the project, the company must apply in Form No. 22 to the National Council for Vocational Education and Training (NCVET) and send a copy to the jurisdictional Commissioner of Income-tax.
The application must include a concurrence letter from the training institute, a detailed project note, expenditure estimates, and expected completion date. NCVET may intimate defects within one month, and the applicant must rectify them within one month. Failure to do so may result in a recommendation to the Board to treat the application as invalid. If complete, NCVET may conduct inquiries and forward its recommendation to the Board within two months, while the Commissioner must also submit his recommendation within one month.
Upon NCVET’s recommendation, the Board may issue notification in Form No. 23 for a period not exceeding three tax years, subject to Rule 40 conditions. Applications may also be rejected. The Board may extend notification after review or revoke it if activities cease, are not genuine, or violate statutory provisions or conditions, after granting an opportunity of hearing. All decisions must be communicated to the applicant, NCVET, the training institute, and the jurisdictional Commissioner.
Rule 39
Guidelines for Approval of Skill Development Projects under Section 47(1)(b) of the Act
(1) A skill development project (hereinafter referred as ‘project’) shall be considered for notification if it is undertaken by an eligible company and the project is undertaken in a separate facility in a training institute.
(2) Before undertaking any project, the eligible company shall make an application in Form No. 22 to the National Council for Vocational Education and Training (hereinafter referred to as “NCVET”) for notification of such project under Section 47(1)(b) of the Act.
(3) A copy of the application shall also be sent to the Commissioner of Income-tax having jurisdiction over the applicant, along with an acknowledgment receipt as evidence of furnishing of application to the NCVET.
(4) The application shall be accompanied by:-
(i) a letter of concurrence from the training institute in which the project is to be undertaken;
(ii) a detailed note on the skill development project to be undertaken by the eligible company; and
(iii) details of the expenditure expected to be incurred on the project and expected date of completion of the project.
(5) If any defect is noticed in the application referred to in sub-rule (2) or if any relevant document is not attached thereto, the NCVET 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.
(6) The applicant shall remove the defect within a period of one month from the end of the month in which the intimation letter for removal of the deficiency is served.
(7) Where the applicant fails to remove the deficiency within the period mentioned in sub-rule (6), the NCVET shall send its recommendation for treating the application as invalid to the Board.
(8) On receipt of the recommendation of the NCVET under sub-rule (7), the Board, if satisfied, may pass an order treating the application as invalid.
(9) If the application is complete in all respects,–
(i) the NCVET may make such inquiry or call for such documents from the eligible company or the training institute as it may consider necessary for satisfying itself regarding the genuineness of the current and proposed activity of the applicant relating to skill development; and
(ii) send its recommendation to the Board for grant of approval or rejection of the application before the expiry of two months from the end of the month in which the application, complete in all respects, was received in its office.
(10) The Commissioner of Income-tax having jurisdiction over the applicant shall send his recommendation to the NCVET for grant of approval or rejection of the application, after considering the compliance of the applicant with the various provisions of the Act before the expiry of one month from the end of the month in which the copy of the application was received in his office.
(11) If the NCVET recommends the grant of approval under sub-rule (9), the Board shall within two months from the end of the quarter in which it receives the report from the NCVET, issue a notification in Form No. 23 under Section 47(1)(b) of the Act, specifying the project, subject to conditions mentioned in rule 40 or such other conditions, as it may deem fit, to be effective for such period not exceeding three tax years.
(12) If the NCVET recommends the rejection of the application under sub-rule (9), the Board shall pass an order rejecting the application.
(13) If the Board is satisfied with the activities of the project during the period of notification, it may notify the said project for a further period in consultation with the NCVET.
(14) If the Board is satisfied that––
(a) the eligible company or the training institute has ceased its activities, or that its activities are not genuine; or
(b) that its activities are not being carried out in accordance with––
(i) all or any of the relevant provisions of the Act or this rule or rule 40; or
(ii) the conditions subject to which the notification was issued,
it may pass an order for revocation of the notification issued under sub-rule (11) or sub-rule (13) after providing an opportunity of being heard.
(15) A copy of notification, approval, rejection, or cancellation shall be communicated to:
(a) the applicant;
(b) the NCVET;
(c) the training institute; and
(d) the Commissioner of Income-tax having jurisdiction over the applicant.
