Draft Income-tax Rules 2026-27 | Blog

Understanding Draft Income-tax Rules 63 to 66

Impact Analysis for FY 2026-27

With the new Income-tax Act, 2025 coming into force from 1 April 2026, India is stepping into a more structured and technology-driven tax environment. To support this transition, CBDT has released draft rules that define how institutions and businesses can claim certain major deductions.

Rule 63: Approval for Universities of National Eminence

Section 133 allows tax benefits for donations made to universities recognized for their national importance. Rule 63 defines the approval framework:

  • Authority: Principal Chief Commissioner of Income-tax (Exemptions).
  • Mandatory Recommendations: Approval now requires concurrence from UGC (General Education) or AICTE (Technical Institutions).

This ensures high academic standards and prevents misuse by unregulated entities.

Rule 64: Compliance Standards for Sports Associations

Associations seeking notification under Section 133 must now meet stricter eligibility conditions:

  • Minimum 3 years of active involvement in sports promotion.
  • Income must be used 100% for sports-related purposes.
  • Strict prohibition on profit distribution to members.
  • Compulsory regular ITR filing and audited financial statements.

Rule 65: Mandatory Form 31 for Rent Deductions

Rule 65 introduces a structured requirement for claiming deductions under Section 134. Taxpayers can no longer simply claim rent-related deductions in the ITR; they must now submit Form 31.

This form captures precise details of rent paid and conditions fulfilled, enabling early verification and reducing assessment disputes.

Rule 66: Audit Reporting through Form 32

Impacting businesses under Section 46 and Sections 138 to 144, Rule 66 replaces multiple reporting formats with a consolidated Form 32.

  • Must be filed by a Chartered Accountant.
  • Submission deadline: At least one month before the ITR due date.
  • Auditor must verify that capital expenditure (for specified businesses) excludes land and financial investments.
Rule Section Focus Area Requirement
63 Section 133 University Approval UGC / AICTE Recommendation
64 Section 133 Sports Associations 3-Year Operational Track Record
65 Section 134 Rent Deductions Form 31
66 Sec 46, 138-144 Business Deductions Form 32 Audit

Final Takeaway

The upcoming tax regime is built around automation and data validation. Missing required forms like Form 31 or Form 32 may result in system-driven rejection of deductions, leaving little scope for manual correction later. A proactive approach to documentation is essential.