(INDIA) — India’s draft tax rulebook assigned the National Council for Science and Technology Innovation to approve scientific research associations and institutions so taxpayers can claim deductions for research spending under the Income-tax Act, 2025.
Draft Income-tax Rule 29 prescribes the National Council for Science and Technology Innovation (NCSTI) as the authority for approving scientific research associations and institutions to enable taxpayers to claim deductions for expenditure under sections 45(1)(a)(ii) and 45(2) of the Income-tax Act, 2025.
The draft rule sets out a structured approval process for entities conducting scientific research eligible for tax benefits and replaces prior frameworks under the Income-tax Rules, 1962.
NCSTI becomes the sole approving body under the draft framework, and the council is headed by Secretary Ashutosh Kumar Jha.
Earlier approvals were split between the Department of Scientific and Industrial Research (DSIR) for in-house R&D and prescribed authorities under section 35(1)(ii).
The proposed change sits inside a wider consolidation of Draft Income-tax Rules, 2026, described as covering 333 rules and 190 forms.
Public feedback on the draft rules closed February 22, 2026.
Draft Income-tax Rule 29 targets deductions linked to scientific research expenditure, with the draft text tying eligibility to sections 45(1)(a)(ii) and 45(2) of the Income-tax Act, 2025.
Under the draft, applicants seeking approval must submit Form 3CA, which details research objectives, infrastructure, funding, and prior approvals if any, to the NCSTI Secretary or a designated officer.
The draft lays out three approval tracks: provisional approval, regular approval, and re-approval, each with defined validity periods and documentary requirements.
Provisional approval is aimed at new entities starting research, and the draft says NCSTI grants it within 60 days of Form 3CA submission if the filing is complete.
That provisional approval carries a validity period of 3 years.
Regular approval follows the provisional stage, and the draft links it to a review of research outcomes and audited reports filed through Form 3CB.
Regular approval carries a validity period of 5 years and is renewable under the draft framework.
Re-approval applies to ongoing entities and requires Form 3CC with evidence of continued research activity.
Re-approval also carries a validity period of 5 years.
The application process described in the draft begins with electronic submission of Form 3CA through the NCSTI portal, along with documents including a Memorandum of Association, research plans, and financials.
After submission, NCSTI reviews the application within 30 days.
If NCSTI finds gaps, the draft provides for a deficiency notice, which applicants can rectify within 15 days.
Once the review stage ends, NCSTI issues an approval order in Form 3CD for provisional approval or Form 3CE for regular approval.
The draft says the approval order specifies conditions, including maintaining separate R&D accounts and annual reporting.
Taxpayers then claim the deduction by referencing the approval number in the income tax return.
Non-compliance can trigger withdrawal of the approval through Form 3CF, the draft says.
Draft Income-tax Rule 29 also frames what counts as eligible spending for deductions.
The draft says expenditure must be on approved scientific research and not routine testing.
For capital expenditure, the draft sets eligibility at 100% under section 45(1)(a)(ii).
For revenue expenditure, the draft sets eligibility at 100% under section 45(2).
The draft includes a spending-use condition for associations receiving funds tied to these approvals.
Associations must use ≥85% of funds for research under the draft.
When contributions exceed what can be used under the threshold, the draft says excess contributions must be refunded within 6 months.
The timelines in the draft link application, reporting, and the new rule’s start date to the Income-tax Act, 2025 rollout.
Applications are due by March 31 preceding the assessment year.
Annual compliance reporting uses Form 3CB and is due by September 30.
The draft sets the rule’s effective date as April 1, 2026.
The transition arrangements described in the draft include a separate deadline for entities that already hold approvals under earlier frameworks.
Entities transitioning from old approvals must reapply by June 30, 2026.
By centralising approvals in NCSTI, the draft text concentrates decision-making for the targeted scientific research deductions in one authority.
The earlier split system referenced in the draft covered DSIR approvals for in-house R&D and other prescribed authorities under section 35(1)(ii).
The draft’s form-driven workflow ties each stage of entry, review, approval, and compliance to a specific sequence of filings and outputs.
The first step, Form 3CA, captures research objectives, infrastructure, funding, and prior approvals if any.
The review window of 30 days and the 15-day cure period for deficiencies create a timetable that can move an application forward to an order in Form 3CD or Form 3CE.
For new entities, the provisional route builds in a 60-day grant timeline, subject to completeness of the Form 3CA submission.
For entities moving beyond the provisional stage, the draft links regular approval to audited reporting in Form 3CB, alongside review of research outcomes.
For ongoing entities that need continued recognition, the re-approval route hinges on Form 3CC and evidence of continued research activity, with a fresh five-year validity period.
The deduction-claim mechanism described in the draft depends on the approval number being referenced in the income tax return.
The compliance lever described in Draft Income-tax Rule 29 is the ability to withdraw approval through Form 3CF where there is non-compliance.
The draft also draws a boundary around the nature of activity that qualifies, stating that approved scientific research qualifies while routine testing does not.
On expenditure types, the draft assigns 100% treatment to capital expenditure under section 45(1)(a)(ii) and 100% treatment to revenue expenditure under section 45(2).
The use-of-funds condition requiring ≥85% of funds to be used for research, and the requirement to refund excess contributions within 6 months, places an operational constraint on approved associations’ handling of contributions.
The draft’s key dates map out how entities and taxpayers time their submissions and reporting.
An entity seeking approval must align its application with the March 31 deadline that falls before the assessment year.
An approved entity must meet the annual Form 3CB compliance report deadline of September 30.
The system-wide shift becomes active on April 1, 2026, the draft says, aligning with the Income-tax Act, 2025 rollout.
For organisations that already operate under earlier approvals, the transition deadline of June 30, 2026 sets the point by which they must reapply under the new draft framework.
The wider consultation process on the draft rules ended on February 22, 2026, as the consolidation exercise moved forward under Draft Income-tax Rules, 2026, which the material describes as spanning 333 rules and 190 forms.
Within that consolidation, Draft Income-tax Rule 29 sets a single-approver model through NCSTI, headed by Secretary Ashutosh Kumar Jha, and couples the model to a sequence of electronic applications and annual compliance reporting built around Form 3CA and Form 3CB.
For taxpayers seeking the targeted deductions under sections 45(1)(a)(ii) and 45(2) of the Income-tax Act, 2025, the draft ties the claim to an approval number issued under the NCSTI process and retained through ongoing compliance.
National Council for Science and Technology Innovation Approves Draft Rule 29
The Indian government has proposed Draft Income-tax Rule 29 to streamline tax deductions for scientific research. By appointing the NCSTI as the central regulator, the rule simplifies the approval process for institutions. Taxpayers can benefit from 100% deductions on eligible spending, provided they adhere to strict electronic filing sequences and maintain high levels of research-specific funding allocation, effective from April 1, 2026.
