Section 35 Expenditure on In-house Research

In-house Research may be either conducted by

1. Approved Company

2. Normal Business

Deduction Allowed is as follows

 Effect of Amendment

EARLIER

Deduction Available as follows

Expenditure on	Approved Company	Normal Business
Land	(No Deduction)	(No Deduction)
Building	100%	100%
Other Expenses (Revenue Expenditure or Capital Expenditure)	200%	100%

---

Now

Expenditure	Approved Company	Normal Business
Land	(No Deduction)	(No Deduction)
Building	100%	100%
Other Expenses (Revenue Expenditure or Capital Expenditure)	150% (FY 2017-18 to FY 2019-20) 100% (FY 2020-21 to FY 2021-22)	100%

In-house Research by Approved Company

In order to get higher deduction(of 200%), following conditions to be satisfied −

 (a) Assessee must be a company .

(Partnership and Proprietorship not covered)

(b) It is engaged in Manufacturing / Production Business of any article or goods except prohibited items mentioned in Eleventh schedule .  

( Eleventh Schedule includes item like beer,wine,tobacco,cosmetics etc)

(c) It should have entered into agreement with   prescribed authority for co-operation and allowed audit by such prescribed authority of its books of accounts

(d)  Only expenditure incurred up to 31/3/2017 allowed as deduction

(Original date was 31/3/2013 now extended to 31/3/2017)

* Prescribed Authority is Secretary, Department of Scientific and Industrial Research (DSIR).

  

Procedure to be followed for Approval

Before granting approval,The prescribed authority(Secretary,DSIR)  shall

check feasibility of scientific research

and

submit its report in relation to the approval of the said facility to the 

 Principal Chief Commissioner 

or Chief Commissioner

 or  Principal Director General

or Director General 

in such form and within such time as may be prescribed.

 

 

Procedure After Approval

Separate books of accounts to be maintained of this R&D Facility and audit report shall be submitted to prescribed authority

In-house Research by Normal Business

1.Both Revenue and Capital Expenditure fully allowed 100%

2.However expenditure on land not allowed

Q1  

Suppose Expenses Include Following Research Expenses

Q2

Solve last question assuming it is a approved company

Q3

Machine purchased during year for Scientific Research of 200000

Expenses include 

Dep on Machine Rs 200000 @15% =30000

Expenditure Incurred Prior to Commencement

Only Following Expenditure Allowed

• Revenue:- Salary and Material Cost Only
• Capital:- All Assets except land

of last 3 years allowed prior to commencement

They are accumulated and allowed in the year business commenced

Q4

Suppose Salary paid during last 5 years for Scientific Research are

Business Actually commenced in 2014-15

Calculate deduction available each year