Provisions of section 35 of the Income Tax Act, 1961 covers deduction allowable towards expenditure on scientific research. The provisions are briefly explained in the present article.
Deduction towards revenue expenditure on scientific research [Section 35(1)]-
Following table briefly explains the deduction available under section 35(1) on revenue expenditure for scientific research-
| Type of expenditure/ amount paid | Amount of deduction | Other details, if any |
| Expenditure incurred for scientific research related to own business | The entire amount of expenditure so incurred is allowed as revenue expenditure | Salary paid to an employee engaged in scientific research and/ or any expenditure incurred on the material used in scientific research before three years of commencement of business will be allowed as a deduction in the previous year in which the business gets commenced. |
| Amount paid to research association or university or college or other institution towards scientific research | A sum equal to 150% of the amount paid is available as deduction till Assessment Year 2020-2021.
From Assessment Year 2021-2022, a sum equal to 100% of the amount paid is available as a deduction. |
An association or university or college or other institution must be approved by the prescribed authority and fulfils all the prescribed rules and regulations. |
| Amount paid to the company to be used for scientific research | The entire amount paid is allowed as deduction. | The company (to which amount is paid) must satisfy the following criteria-
|
| Amount paid to association or university or college or other institution engaged in research of social science/ statistical research | The entire amount paid is allowed as deduction. | An association or university or college or other institution must be approved by the prescribed authority and fulfils all the prescribed rules and regulations. |
Deduction towards capital expenditure on scientific research [Section 35(iv)]-
Type of deduction-
The deduction is available in respect of capital expenditure incurred towards scientific research related to the own business.
Amount of deduction-
100% of the capital expenditure so incurred is allowed as deduction.
Other points-
- Capital expenditure incurred towards the acquisition of land is not admissible as a deduction.
- All the capital expenditure incurred during immediately three years before the commencement of business is allowed as a deduction in the year the business is commenced.
- No deduction will be allowed under section 32(1)(ii) i.e. depreciation.
Deduction towards sum paid to a National Laboratory/ University [Section 35(2AA)]-
Type of deduction-
The deduction is available for any sum paid to for scientific research under an approved programme to the followings-
- A National Laboratory,
- A University,
- An Indian Institute of Technology,
- A specified person approved by the specified authority.
Amount of deduction-
| Assessment Year | The corresponding percentage of available deduction |
| Till Assessment Year 2020-2021 | 150% of the sum paid |
| From Assessment Year 2021-2022 | 100% of the sum paid |
Other points-
- Deduction available under section 35(2AA) will not be denied on the ground that subsequent to the amount paid the approval granted to the Laboratory/ University has been withdrawn.
- No deduction in respect of such amount paid to the Laboratory/ University will be allowed under any other provisions of the Income Tax Act.
Deduction towards in-house research and development [Section 35(2AB)]-
Type of deduction-
Expenditure incurred (other than the purchase of land) on in-house scientific research and development is available as a deduction under section 35(2AB).
Conditions for claiming deduction-
1. The deduction is available only to a company.
2. The company should be engaged in the business of bio-technology or manufacture/ production of any article/ thing (other than listed on Eleventh Schedule).
3. The company should have entered into an agreement with the prescribed authority for co-operation in the respective research and development facility.
4. The company needs to maintain separate books of account for each approved research facility.
Amount of deduction-
| Assessment Year | The corresponding percentage of available deduction |
| Till Assessment Year 2020-2021 | 150% of the sum paid |
| From Assessment Year 2021-2022 | 100% of the sum paid |
Author Bio
is converting a recognised trust into institution approved for section 35 a good idea, what is the effect
Query: Is DSIR approval required for all in house projects? If a company has in house R&D, if so, i am incurring rev exp and capex in 2022-23, business also commences in the same year,then for taking the deduction am i required to take the DSIR approval for such R&D?
or DSIR approval required in cases like below if Rev exp and Capex incurred in 2021-22 and business commenced in 2022-23 ?
Company is claiming deduction u/s 35(2AB) for research centre exp incurred. From AY 2021-22 onwards, since 100% deduction allowed under this section, instead whether the research centre expense can be claimed as normal business expense also?
Since claim u/s 35(2AB) require CA certification and approval from DSIR also.
Please clarify.