Rule 34 of the Income Tax Rules, 2026 specifies the books of account and audit requirements for Universities, colleges, and other institutions approved for scientific research under Section 45(3)(a) of the Income Tax Act, 2025. Understanding these requirements is essential for institutions seeking to maintain their approval and for donors claiming deductions.
The Regulatory Framework
Rule 34 applies to Universities, colleges, and other institutions approved under Section 45(4)(b) for the purposes of scientific research or research in social science or statistical research【34†L3-L5】.
Use of Funds
The sum paid to a University, college or other institution shall be used for scientific research and research in social science or statistical research【34†L3-L4】.
Research Activity
The applicant University, college or other institution shall carry out scientific research, research in social science or statistical research through its faculty members or its enrolled students【34†L6-L7】.
Books of Account Requirements
Separate Books of Account
A University or college or other institution approved under Section 45(4)(b) shall maintain separate books of account in respect of the sums received by it for scientific research or, as the case may be, for research in social science or statistical research【34†L9-L11】.
Reflection of Research Expenditure
The books shall reflect the amount used for carrying out research【34†L12】.
Statement of Donations
The University or college or other institution shall maintain a separate statement of donations received and the amount used for research. A copy of such statement duly certified by the auditor shall accompany the report of audit【34†L18-L19】.
Audit Requirements
Audit by Accountant
The books of account shall be audited by an accountant, as defined in section 515(3)(b)【34†L14-L15】.
Report of Audit
The report of audit duly signed and verified by such accountant shall be furnished to the Commissioner of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under section 263(1)【34†L16-L17】.
Annual Reporting Requirements
The University, college or other institution shall, by the due date of furnishing the return of income under section 263(1), furnish a statement to the Commissioner of Income-tax containing【34†L21-L32】:
- A detailed note on the research work undertaken by it during the tax year
- A summary of research articles published in national or international journals during the tax year
- Any patent or other similar rights applied for or registered during the tax year
- The programme of research projects to be undertaken during the forthcoming tax year and the financial allocation for such programme
Consequences of Non-Compliance
Report to Central Government
If it is found by the Commissioner of Income-tax that the University or college or other institution【34†L34-L45】:
- Is not maintaining separate books of account for research activities
- Has failed to furnish its audit report
- Has not furnished its statement of the sums received and the sums used for research or a statement referred to in sub-rule (5)
- Has ceased to carry on its research activities, or its activities are not genuine
- Is not fulfilling the conditions subject to which approval was granted
The Commissioner may, after making appropriate enquiries, furnish a report on the circumstances to the Central Government within six months from the date of furnishing the return of income under section 263(1)【34†L42-L45】.
Withdrawal of Approval
Based on the report, the Central Government may withdraw the approval granted to the University, college, or other institution.
Practical Considerations
For Universities and Colleges
Institutions should:
- Maintain separate books of account for research activities
- Ensure timely audit of research accounts
- Furnish audit report to the Commissioner by the due date
- Maintain statement of donations received and amount used for research
- Submit annual statement containing research work undertaken, publications, patents, and future programmes
For Donors
Donors should:
- Ensure the recipient institution is maintaining proper books of account
- Verify that the institution is complying with audit requirements
- Obtain the certificate in Form No. 16
Expert Legal Guidance
Understanding the books of account and audit requirements for research deductions is essential for Universities, colleges, and other institutions. Anuj Desai & Associates provides expert advisory services on Direct Tax Code compliance, helping institutions maintain proper books and comply with audit requirements.