Rule 2BC: Annual Receipts Limit for Educational Institutions and Hospitals
Rule 2BC historically prescribed the annual receipts threshold for specified educational and medical institutions under Section 10(23C)(iiiad) and Section 10(23C)(iiiae) of the Income-tax Act, 1961. The threshold was subsequently revised through statutory amendments.
What does Rule 2BC cover?
The rule was framed for two exemptions under Section 10(23C) of the Income-tax Act, 1961:
- Section 10(23C)(iiiad): Universities and other educational institutions existing solely for educational purposes and not for profit.
- Section 10(23C)(iiiae): Hospitals and other institutions existing solely for philanthropic purposes and not for profit, providing medical treatment, convalescence, medical attention or rehabilitation.
Historical text and the revised receipts limit
The original text reproduced on this page prescribed an annual receipts amount of Rs. 1 crore, for receipts on or after 1 April 1998, separately for the educational and hospital categories. That figure should not be used without checking subsequent amendments.
| Aspect | Earlier Rule 2BC framework | Revised Section 10(23C) framework from AY 2022-23 |
|---|---|---|
| Receipts ceiling | Rs. 1 crore | Rs. 5 crore |
| Measurement | Annual receipts of the institution | Aggregate annual receipts of relevant institutions of the same person |
| Educational institutions | Section 10(23C)(iiiad) | Section 10(23C)(iiiad), as amended |
| Hospitals and medical institutions | Section 10(23C)(iiiae) | Section 10(23C)(iiiae), as amended |
Eligibility requirements
Educational institutions
The institution must exist solely for educational purposes and not for purposes of profit. The applicable receipts test is only one condition of the exemption; the nature of its activities and the law applicable to the relevant year also matter.
Hospitals and medical institutions
The hospital or institution must exist solely for philanthropic purposes and not for profit, and must provide the medical or rehabilitation services described in the legislation. Its eligibility is subject to the applicable aggregate receipts threshold and other legal requirements.
How aggregate annual receipts work
Under the revised 1961 Act provisions, the receipts of the relevant educational institutions run by the same person are considered together for the educational exemption; likewise, receipts of the relevant hospitals or medical institutions run by that person are considered together for the medical exemption. This is not a separate Rs. 5 crore allowance for every institution.
Example: If a person operates two qualifying educational institutions with annual receipts of Rs. 2 crore and Rs. 2.5 crore, their aggregate is Rs. 4.5 crore. If receipts instead total Rs. 5.5 crore, the small-institution exemption under the revised Section 10(23C)(iiiad) threshold would not apply. Other exemption routes may need to be examined separately.
Position for tax years beginning in 2026
The Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961 for the tax years to which the new law applies, subject to transitional and savings provisions. Consequently, references to Rule 2BC and Section 10(23C) of the 1961 Act should be read as part of the earlier statutory framework, not assumed to be the operative citation for every tax year after the changeover.
For an actual exemption claim, verify the corresponding provisions and rules under the legislation applicable to that tax year, including any registration, approval, compliance and reporting requirements.
Practical compliance checklist
- Identify the tax year and the statute applicable to it.
- Confirm whether the institution is exclusively educational or philanthropic and not operated for profit.
- Calculate annual receipts using the legally applicable aggregation rule.
- Review whether the automatic receipts-based exemption applies or whether another approval or registration route is required.
- Maintain accounts, receipts records and supporting documents.
Frequently asked questions
Is the limit under Rule 2BC still Rs. 1 crore?
No. Rs. 1 crore is the earlier amount in the historical rule. The 1961 Act was amended to provide a Rs. 5 crore aggregate annual receipts limit from assessment year 2022-23 for the relevant Section 10(23C) exemptions. The law for subsequent tax years must be checked separately.
Does the limit apply to each school separately?
Under the revised 1961 Act provisions, relevant institutions operated by the same person are aggregated rather than tested independently.
Does being below the threshold automatically make an institution exempt?
No. The institution must also satisfy the statutory conditions relating to its purpose, activities and applicable tax-year requirements.
This article is general information on the historical Rule 2BC and subsequent statutory changes, not a substitute for examining the legislation applicable to a particular tax year.