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Rule 39Published

Rule 39: Skill development project approval

Rule 39 sets the approval process for skill development projects under section 47(1)(b). An eligible company must use a separate facility in a qualifying training institute and apply before undertaking the project.

Official notified Income-tax Rules, 2026

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Rule 39 - Procedure for approval of skill development projects under section 47(1)(b)

(1) A skill development project (herein referred as the project) shall be considered for notification, if it is undertaken by an eligible company and the project is undertaken in a separate facility in a training institute.

(2) Before undertaking any project, the eligible company shall make an application in Form No. 22 to the National Council for Vocational Education and Training (herein referred to as ―National Council‖) for notification of such project under section 47(1)(b).

(3) A copy of the application shall also be sent to the Commissioner of Income-tax having jurisdiction over the applicant, along with an acknowledgment receipt as evidence of furnishing of application to the National Council.

(4) The application shall be accompanied by– (a) a letter of concurrence from the training institute in which the project is to be undertaken; (b) a detailed note on the skill development project to be undertaken by the eligible company; and (c) details of the expenditure expected to be incurred on the project and expected date of completion of the project.

(5) If any defect is noticed in the application referred to in sub-rule (2), or if any relevant document is not attached thereto, the National Council shall, before the expiry of one month from the end of the month in which the application is received in its office, intimate the defect to the applicant for its rectification.

(6) The applicant shall remove the defect within a period of one month from the end of the month in which the intimation letter for removal of the deficiency is served.

(7) Where the applicant fails to remove the deficiency within the period mentioned in sub-rule (6), the National Council shall send its recommendation for treating the application as invalid to the Board.

(8) On receipt of the recommendation of the National Council under sub-rule (7), the Board, if satisfied, may pass an order treating the application as invalid.

(9) If the application is complete in all respects,– (i) the National Council may make such inquiry or call for such documents from the eligible company or the training institute as it may consider necessary for satisfying itself regarding the genuineness of the current and proposed activity of the applicant relating to skill development; and (ii) send its recommendation to the Board for grant of approval or rejection of the application before the expiry of two months from the end of the month in which the application, complete in all respects, was received in its office.

(10) The Commissioner of Income-tax having jurisdiction over the applicant shall send his recommendation to the National Council for grant of approval or rejection of the application, after considering the compliance of the applicant with the various provisions of the Act before the expiry of one month from the end of the month in which the copy of the application was received in his office.

(11) If the National Council recommends the grant of approval under sub-rule (9), the Board shall within two months from the end of the quarter in which it receives the report from the National Council, issue a notification in Form No. 23 under section 47(1)(b), specifying the project, subject to conditions mentioned in rule 40 or such other conditions, as it may deem fit, to be effective for such period not exceeding three tax years.

(12) If the National Council recommends the rejection of the application under sub-rule (9), the Board shall pass an order rejecting the application.

(13) If the Board is satisfied with the activities of the project during the period of notification, it may notify the said project for a further period in consultation with the National Council.

(14) If the Board is satisfied that–– (a) the eligible company or the training institute has ceased its activities, or that its activities are not genuine; or (b) that its activities are not being carried out in accordance with–– (i) all or any of the relevant provisions of the Act or this rule or rule 40; or (ii) the conditions subject to which the notification was issued, it may pass an order for revocation of the notification issued under sub-rule (11) or sub-rule (13) after providing a reasonable opportunity of being heard.

(15) A copy of notification, approval, rejection, or cancellation shall be communicated to– (a) the applicant; (b) the National Council; (c) the training institute; and (d) the Commissioner of Income-tax having jurisdiction over the applicant.

Rule breakdown

Check company, facility and institute eligibility

The project must be undertaken by an eligible company in a separate facility in a training institute. Rule 40 supplies the definitions of eligible company and training institute.

Check those definitions and the actual facility arrangements before relying on a general training or corporate-learning description.

File Form 22 before undertaking the project

Apply to the National Council for Vocational Education and Training in Form No. 22 before undertaking the project. Send a copy to the jurisdictional Commissioner with the acknowledgment of furnishing it to the Council.

Attach the institute’s concurrence letter, a detailed project note, expenditure details and the expected completion date. Keep the two recipients’ receipt dates separately.

Correct deficiencies within the stated period

The Council must intimate a defect or missing relevant document within one month from the end of the month of receipt. The applicant has one month from the end of the month of service to remove it.

If the defect remains, the Council sends an invalidation recommendation to the Board. The Board, if satisfied, may make the invalidation order; the recommendation is not itself that order.

Track the two recommendation clocks

For a complete application, the Council may inquire or call for documents and sends its recommendation to the Board within two months from the end of the month of receiving the complete application.

The Commissioner separately sends a recommendation to the Council within one month from the end of the month in which the copy application reaches his office. Do not treat those as the same receipt event or deadline.

Form 23 notification and initial effective period

If the Council recommends approval, the Board must issue the Form No. 23 notification within two months from the end of the quarter in which the Council’s report reaches it. The initial period cannot exceed three tax years.

The notification is subject to Rule 40 and any additional conditions imposed. If the Council recommends rejection, the rule requires the Board to pass the rejection order.

Further notification and revocation

The Board may notify a further period in consultation with the Council if satisfied with the project’s activities during the notified period. Do not assume a further period begins automatically at expiry.

The listed cessation, genuineness or condition failures may lead to revocation after a reasonable hearing opportunity. Copies of the relevant decisions go to the applicant, Council, training institute and jurisdictional Commissioner.

A practical approval file

Keep eligibility evidence, facility and concurrence documents, the application and copy, receipts, deficiency correspondence, notification and ongoing Rule 40 records together.

The application date, complete-application date and report-receipt date govern different stages. A calendar that records only one filing date can miss these distinctions.

Key takeaways

Apply first

Form 22 is required before undertaking the project.

Separate receipt clocks

Council, Commissioner and Board receipts govern different stages.

Ongoing Rule 40 conditions

Approval does not end accounting, activity and reporting obligations.

Practical checklist

  • Verify the Rule 40 definitions and facility arrangement.
  • Obtain the institute concurrence and retain application receipts.
  • Track each deadline from its stated receipt or service event.

Avoid

  • Do not apply only after undertaking the project.
  • Do not treat a recommendation as the Board’s final decision.

FAQs

Does any company’s internal training automatically qualify?

No. The eligible-company and training-institute definitions, separate facility and project conditions must be met.

Which form records the initial notification?

Form No. 23 under sub-rule (11).

Is a Council invalidation recommendation the final order?

No. The Board may pass the invalidity order if satisfied after receiving the recommendation.

Does the initial notification always last three years?

No. It lasts for the specified period, which cannot exceed three tax years.

Glossary

National Council
The National Council for Vocational Education and Training identified in Rules 39 and 40.
Complete application
The complete filing whose receipt triggers the Council’s recommendation period under sub-rule (9).

Official sources