(INDIA) — India’s Central Board of Direct Taxes invited public feedback on February 8, 2026 on Draft Income Tax Rules 2026 that include Draft Income Tax Rule 36, a set of guidelines for notifying affordable housing projects and semiconductor wafer fabrication units for tax benefits.
Draft Income Tax Rule 36 sets out how the tax authorities would notify affordable housing projects under Section 46(11)(d)(vii) and semiconductor wafer fabrication units under Section 46(11)(d)(xiii) as specified businesses eligible for tax benefits under the new Income Tax Rules 2026.
The draft rule ties those notifications directly to defined sections in the law, laying out the framework developers and manufacturing units must meet to be treated as specified businesses. It places affordable housing projects and semiconductor wafer fabrication units within the same notification mechanism, even as the draft provides more detail on housing conditions than on chipmaking facilities.
The Draft Income Tax Rules 2026, including Rule 36, are scheduled to come into effect on April 1, 2026. They replace the Income Tax Rules, 1962, which had been in effect for nearly six decades.
India’s new framework consolidates regulations into 333 rules and 190 forms, down from over 500 rules and 350 forms previously. The draft rules also emphasize digital-first compliance and automated processing, including pre-filled tax returns and technology-driven approaches to reduce filing complexity and compliance costs.
Within that broader revamp, Draft Income Tax Rule 36 focuses on the mechanics and conditions for notification of two categories of specified businesses. One is “affordable housing projects,” a term the draft links to detailed eligibility requirements for residential units and project structure.
For affordable housing projects, the draft lays out residential unit requirements aimed at keeping unit size and pricing within defined thresholds for cities or towns other than metropolitan cities. Under the draft, the carpet area of a residential unit must not exceed 90 square meters in such non-metropolitan locations.
The draft also sets monetary limits tied to what buyers are charged and how property is valued for stamp duty purposes. It caps the gross amount charged for residential apartments at ₹45 lakhs.
Alongside that pricing cap, Draft Income Tax Rule 36 introduces a valuation condition that the stamp duty value of a residential unit should not exceed ₹45 lakhs, described in the draft as a new condition. In combination, the gross amount charged limit and the stamp duty value limit place affordability checks both on transaction pricing and on official valuation.
The draft also sets requirements for how the housing project is run and accounted for, beyond the physical and monetary characteristics of individual units. It requires the assessee to maintain separate books of account for the housing project, a condition intended to keep project-level records distinct for compliance and verification.
Draft Income Tax Rule 36 also bars certain contractual arrangements from qualifying, by stating the assessee should not execute the housing project as a works contract awarded by any person, including central or state government. That condition places a structural boundary around the type of development activity that can qualify when a project is notified as an affordable housing project.
The tax benefit attached to notified affordable housing projects is set out in the context accompanying the draft guidelines. Affordable housing projects notified under these guidelines qualify for 100% deduction on profits and gains from such projects under Section 80-IB of the Income Tax Act.
The draft positions its affordable housing conditions as a way to channel that Section 80-IB deduction toward projects built under government-approved affordable housing schemes while maintaining transparency and compliance standards. By tying notification to unit size, pricing, valuation, accounting separation, and project execution conditions, Draft Income Tax Rule 36 sets the parameters a developer must satisfy before a project can be notified for the intended tax treatment.
Alongside housing, Draft Income Tax Rule 36 establishes guidelines for notifying semiconductor wafer fabrication units under Section 46(11)(d)(xiii) as specified businesses. The draft’s treatment of semiconductor wafer fabrication units links them to the notification process in the same way as affordable housing projects, bringing high-value manufacturing within the specified business framework.
However, the draft does not elaborate detailed criteria for semiconductor wafer fabrication units. That leaves the draft rule’s central point for semiconductor wafer fabrication units focused on the fact of notification under the cited section, rather than on a set of enumerated operational or investment conditions within the rule’s text as presented.
The inclusion of semiconductor wafer fabrication units in Draft Income Tax Rule 36 places them within the architecture of the Income Tax Rules 2026 at a time when the broader draft emphasizes automation and digital-first compliance. Within that system-wide shift, Rule 36 functions as a gateway provision: it describes how certain activities—affordable housing projects and semiconductor wafer fabrication units—enter the “specified business” category through notification under the stated sections.
By consolidating rules and forms, the Draft Income Tax Rules 2026 aim to reduce procedural sprawl while retaining targeted conditions where policymakers seek tight definitions. Draft Income Tax Rule 36 reflects that approach by specifying criteria for affordable housing projects in measurable terms—carpet area, pricing, valuation, and recordkeeping—while separately providing for the notification of semiconductor wafer fabrication units under the relevant section.
The CBDT’s February 8, 2026 invitation for public feedback frames Draft Income Tax Rule 36 as part of a wider consultation over how the new rules will operate in practice. With an April 1, 2026 start date scheduled for the new rules, the consultation period places attention on whether notification guidelines, compliance conditions, and the shift to automated processing align with the government’s goal of practical, taxpayer-friendly regulations.
Draft Income Tax Rule 36 Targets Affordable Housing and Semiconductor Units
India’s new Draft Income Tax Rule 36 defines the eligibility for tax benefits in affordable housing and semiconductor manufacturing. Scheduled for April 2026, the rule mandates strict pricing caps and size limits for residential projects to ensure they meet affordability standards. It also streamlines the notification process for high-tech manufacturing, supporting the government’s broader goal of reducing regulatory complexity through a consolidated, digital-first tax framework.
