Rule 287: When an institution is substantially financed by the Government
Rule 287 sets the test for "substantially financed by the Government" for Schedule VII [Table: Sl. Nos. 17 and 18]. A university or other educational institution, hospital or other institution referred to there is substantially financed for a tax year if the Government grant for that year exceeds 50% of its total receipts, including donations, for that year.
Official notified Income-tax Rules, 2026Need advice on Rule 287?
This article is for general information. Read the official Rules and applicable Act amendments, including the Taxation and Other Laws (Amendment) Act, 2026. If you need professional advice for your situation, contact Bizeneed.
On this page
Bare law
Rule 287 - Percentage of Government grant for considering any University, hospital, or any other institution, as substantially financed by the Government for purposes of Schedule VII [Table: Sl. Nos. 17 and 18] to Act
For the purposes of Schedule VII [Table: Sl. No. 17 and 18] to the Act, any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any tax year, if the Government grant to such University or other educational institution, hospital or other institution for such tax year exceeds 50% of their total receipts including any donations during the said tax year.
Rule breakdown
The test
Compare Government grant for the tax year with total receipts (including donations) for the same year.
If grant is more than 50%, the institution is substantially financed by the Government for that year.
Year-by-year
The test applies for each tax year separately.
Key takeaways
More than 50%
Grant must exceed half of total receipts.
Donations count
Total receipts include donations.
Annual test
Applied separately for each tax year.
Practical checklist
- Work out the grant ratio at year-end using total receipts including donations.
Avoid
- Do not exclude donations from total receipts.
FAQs
What is the threshold?
Government grant exceeding 50% of total receipts including donations for the tax year (Rule 287).
Are donations included in total receipts?
Yes.
Is it tested every year?
Yes, for each tax year.
Glossary
- Government grant
- Grant received from the Government in the tax year.
- Total receipts
- All receipts of the institution for the year, including donations.