What do you mean by Scientific Research Expenditure Under Section 35

“The term scientific research means any activity for the extension of knowledge in the field of natural or applied sciences including agriculture, animal husbandry or fisheries.”

Revenue expenditure done by the assessee himself [sec35 (1) (¡)]

If assessee himself carries on scientific research, deduction is allowed only if it relates to the business.

Contribution made to outsiders [sec. 35(1) (¡¡)/ (¡¡¡)]

Where the assessee does not himself carry on research but make contribution to other institutions the deduction is allowed –

To whom contribution can be given

Weighted deduction

An approved research association which has, as its object, undertaking of scientific research related or unrelated to business

175% of actual expenditure

An approved university, collage or other institution for use of scientific research related or unrelated to business

175% of actual expenditure

An approved association which has as its object the undertaking of research in social science or statistical science or approved university, collage or other institution for use of research in social science or stastical research releated or unreleated to business

125% of actual expenditure

Capital expenditure incurred by assessee himself [sec35 (2)}

Where any expenditure of capital nature on scientific research related to his business, the whole expenditure incurred in any previous year is allowed as deduction in previous year.

Note:-

  1. Capital expenditure on conducting scientific research is deductible at rate of 100 % in the year in which expenditure is incurred.
  2. Deduction is not available if expenditure is incurred on land
  3. No deduction by way of depreciation is allowed in respect of an asset used in scientific research

Contribution to national laboratory [sec. 35(2AA)]

Condition one

The payment is made to nation laboratory or university

Condition two

The aforesaid person for undertaking scientific research programs me approved by prescribed authority.

Amount of deduction:-

The taxpayer is eligible for deduction equal to 175%. Such contribution is not eligible for any other deduction.

Expenditure on In-House Research and Development Expenses

Condition

  1. The taxpayer is a company.
  2. The company should be engaged in the business of manufacturing or production of any article or thing
  3. The above expenditure is incurred on in-house research and development facility up to march 31, 2012
  4. The expenditure is approved by prescribed authority.

Amount of deduction:-

If above conditions are satisfied then a sum equal to 200 % of the expenditure so incurred shall be allowed as deduction.

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