Section | Nature of expenditure | Quantum of deduction | Qualifying Assessee | Other provisions |
35(1)(i) | Scientific Research
Any expenditure (not being capital in nature) laid out or expended for scientific research related to assessee's business | The amount actually incurred | All assessees | Where any expenditure is laid out or spent before the commencement of business on payment of salaries to an employee engaged in such scientific research or on purchase of materials used in such research, the aggregate of such expenses so incurred within three preceding previous years shall, to the extent certified by prescribed authority (Refer Rule 6) shall be deemed to have been expended in the year in which actual business is commenced. |
35(1)(ii) | Scientific Research
Payment to a notified/approved research association/university/college or other institution to be used for scientific research | 100% of the sum paid (w.e.f. AY 2021-2022) | All assessees | Such association, university, college, or other institution is approved according to the prescribed guidelines and is notified in the Official Gazette by Central Government (refer Rules 5C, 5D and 5E)
Note :
(Deduction under this section shall not be denied for such payments made on the ground that subsequent to such payment, approval granted to such association, university, college, etc. has been withdrawn).
The approval given by the Government as aforesaid, upto 30-09-2020 shall be deemed to have been withdrawn and such association, university, college etc, should apply on or before 31-12-2020 to income tax authority for renewal and such renewal if granted shall be valid for five years beginning from A.Y.22-23. No deduction under this section shall be allowed, unless the entities prepares the statement in prescribed form and submit it to the concerned authority within the prescribed time and it also furnishes the certificate specifying the amount of donation to the donor containing such particulars within prescribed time. |
35(1)(iia) | Scientific Research
Payment to an approved company registered in India, with the main object of scientific research and development | 100% of such payments made w.e.f. A.Y. 2018-19 | All assessees | The company should be approved by prescribed authority and fulfils prescribed conditions (Refer Rule 5F).
The approval given by the Government as aforesaid upto 30-09-2020, shall be deemed to have been withdrawn and such company, shall apply on or before 31-12-2020, to income tax authority for renewal and such renewal if granted shall be valid for five years beginning from A.Y.22-23. No deduction under this section shall be allowed, unless the entities prepares the statement in prescribed form and submit it to the concerned authority within the prescribed time and it also furnishes the certificate specifying the amount of donation to the donor containing such particulars within prescribed time. |
35(1)(iii) | Statistical or Social Science Research
Payment made to a research association having its object of undertaking research in social science or statistical research or to any university, college, or other institution to be used for research in social science or statistical research | 100% of the sum paid w.e.f. A.Y. 2018-19 | All assessees | Such association, university, college, or other institution is notified in the official gazette by Central Govt. and is approved according to the prescribed guidelines (Refer Rules 5C, 5D and 5E) (Deduction under this section shall not be denied for such payments made on the ground that subsequent to such payment, approval granted to such university, college, etc. has been withdrawn.)
The approval given by the Government as aforesaid before 30-09-2020, shall be deemed to have been withdrawn and such association, university, college etc, shall apply on or before 31-12-2020 to income tax authority for renewal and such renewal if granted shall be valid for five years beginning from A.Y.22-23. No deduction under this section shall be allowed, unless the entities prepares the statement in prescribed form and submit it to the concerned authority within the prescribed time and it also furnishes the certificate specifying the amount of donation to the donor containing such particulars within prescribed time. |
35(1)(iv) | Scientific Research
Expenditure of capital nature on scientific research (other than expenditure on acquisition of land or interest therein) related to the business carried on by the assessee | 100% of Expenditure incurred | All assessees | Where any capital expenditure is incurred prior to commencement of the business, the aggregate of such expenses so incurred within three years immediately preceding the commencement of the business shall be deemed to have been incurred in the year in which the business is commenced.
No depreciation shall be allowed on such assets.
Where the amalgamating company transfers capital assets to the amalgamated company being an Indian company, then the deduction under this clause would be allowed to the amalgamated company and in such case no deduction would be allowed to the amalgamating company provided the amalgamated company has not sold/transferred such assets. |
35(2AA) | Scientific Research
Payment to a National Laboratory/university or an Indian Institute of Technology or a specified person |
100% of the sum paid w.e.f AY 2021-22
| All assessees | The payment should be made with the specified direction that the sum shall be used in a scientific research undertaken under a programme approved by the head of National laboratory, university, or IIT and in case of specified person, the principal scientific advisor to the Govt. of India.
Where deduction is allowed under this section no other deduction would be allowed under any other provisions of this Act.
(Deduction under this section shall not be denied for such payments made on the ground that subsequent to such payment, approval granted to such Laboratory, university, etc. has been withdrawn or such laboratory, university having withdrawn the programme undertaken.)
Rule 6(1A),6(3),6(5),6(6), and 6(7). |
35(2AB) | Scientific Research
Any expenditure incurred by a company, on scientific research (not being in nature of cost of land and building) on in-house scientific research and development facilities as approved by the prescribed authorities (Refer Rule 6). | 100% of such expenses incurred w.e.f. A.Y. 2021-22 | Company, engaged in any business biotechnology or of manufacture or production of any article or thing, other than those specified in the list of Eleventh Schedule. | xNo other deduction in respect of such expenses would further be allowed, (No deduction is allowed under this section for companies mentioned in section 35(1)(iia))
Company should enter into an agreement with the prescribed authority for co operation in such research and development and audit of accounts maintained for such facilities.
Expenditure on scientific research in relation to Drug and Pharmaceuticals shall include expenses incurred on clinical trials, obtaining approvals from authorities and for filing an application for patent.
In case of amalgamation of the company the provisions of this section would apply to amalgamated company as they would have applied to amalgamating company.
Rule 6(1B),(4),(5A),(7A) |
35ABA | Right to use spectrum for telecommunication services
Capital Expenditure incurred for acquiring any right to use spectrum for telecommunication services either before or after the commencement of business for the payment actually made | Appropriate fraction of expenditure incurred
Appropriate fraction means one divided by number of relevant previous year where relevant previous year will mean in case of expenditure incurred prior to commencement of business: number of years for the period beginning with the year in which business commences and years during which the fees paid would be in force.
in case of payment is made after the commencement of business, the relevant period would mean number of years for the period beginning from the year in which payment is actually made and previous year during which such spectrum for which payment is made is in force. | All Assessees | Where the deduction is allowed under this section and subsequently there is any failure to comply with the provisions of this Section the deduction allowed would be treated as wrongly allowed and AO may recomputed the income for the said previous year by making necessary rectification.
For the purpose of disallowance provisions of Section 154(7) shall operate as if the period of 4 years start from the year in which the default is made.
Apart from the above conditions the conditions mentioned in section 35ABB with regards to transfer of License including transfer on account if amalgamation / demerger shall also be applicable as if the word license is replaced by the word spectrum.
Rule 6A. |
35ABB | License to operate telecom services
Capital expenses incurred for obtaining License for right to operate telecommunication services either before or after the commencement of such business to operate such services | Appropriate fraction of amount actually paid for obtaining license.
The appropriate fraction would mean
In case where the amount is paid prior to commencement of business, the deduction would be allowed in equal installments beginning from the previous year in which the business commences and ending in the year in which the licence expires.
In other case the amount will be allowed in equal installments from the previous year in which such expenditure is actually paid till the previous year in which the licence expires. | All Assessees | The deduction is allowable on the payment actually made, irrespective of the previous year for which the liability for such expenditure was incurred.
Where the deduction is allowed under this clause no depreciation would be allowed.
Where the license is transferred and if the amount realized in so far as it relates to capital sum, is less than the amount remained to be allowed then, the amount remained to be allowed as reduced by proceeds received would be allowed as deduction in the year in which the same is transferred.
Whereas if the amount so realized (i.e. capital sum) on transfer of whole or part of the license is more than the amount remained to be allowed then the difference between amount received on transfer (not exceeding license fees actually paid) and the amount remained to be allowed would be chargeable to tax in the year of such transfer as business income whether or not such business is in continuance and no further deduction shall be allowed in the year of transfer or in succeeding years.
Where a part of the license is transferred and the amount realized is not more than the amount remained to be allowed then the difference between the amount remained to be allowed and the amount received on transfer shall be divided by the number of unexpired years from the previous year in which such transfer takes place and would be allowed in equal installment accordingly.
In case of amalgamation or demerger of the company the provisions of this section would apply to amalgamated or resulting company as they would have applied to amalgamating or demerged company |
35AD | Expenditure on specified business
Expenditure of capital nature (other than expenditure incurred on acquisition of any land, goodwill or financial instruments and or w.e.f AY 18-19 payment made on any day otherwise than by account payee cheque / draft or electronic payment through a bank account or through such other electronic mode (w.e.f A.Y. 2020-21) as may be prescribed in excess of Rs.10000/-) incurred, wholly and exclusively, for the purposes of any specified business carried on by the assessee.
Specified Businesses : - Setting up and operating a cold chain facility and Setting up and operating a warehousing facility for agriculture produce (commencing business on or after 1-4-2009) (Cold chain facilities would mean a chain of facilities for storage or transportation of agricultural and forest produce, meat and meat products, poultry, marine and dairy products, products of horticulture, floriculture and apiculture, and processed food items under scientifically controlled conditions including refrigeration and other facilities necessary for the preservation of such produce.)
- Laying and operating cross country natural gas, crude or petroleum oil pipeline network for distribution and includes storages facilities being integral part of such network provided such business is approved by the petroleum and natural gas regulatory board and is notified by the Central Government in the Official Gazette commences operations after 1.4.2007 in case of natural gas and after 01.04.2009 in other cases (Deductions available from A.Y. 2010-11)
- Building and operating anywhere in India a hotel of two star and above commences business on or after 1.4.2010 as classified by Central Government (i.e. Based on certificate issued by the Tourism Department)
- Building and operating anywhere in India a hospital with at least one hundred beds for patients commences operations on or after 1.4.2010
- Developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by Central Government or a State Government and as notified by board in accordance with guidelines prescribed and commences operation on or after 1.4.2010
- Developing and building a housing project under a scheme for affordable Housing framed by Central Government or a State Government and as notified by board in accordance with guidelines prescribed and commences operation on or after 1.4.2011
- Capital Expenditure incurred in a new plant or in new installed capacity in existing plant for production of fertilizers commencing operation on or after 1.4.2011.
- Setting up and operating an inland container depot or container freight station notified or approved under Customs Act 1962 (52 of 1962) on or after 1.4.2012
- Bee keeping and production of honey and bee wax on or after 1.4.2012
- Setting up and operating warehousing facility for storage of sugar on or after 1.4.2012
- Laying and operating slurry pipeline for transportation of iron ore on or after 01.04.2014
- Setting up and operating a semi conductor wafer fabrication manufacturing unit as notified by the board on or after 01.04.2014
- Developing or maintaining and operating or developing, maintaining and operating _any infrastructure facility on or after 2017 w.e.f. AY 2018-2019
Clause b
Any other cases not falling under any clauses above. On or after 1-4-2009 | Any expenditure of capital nature incurred solely for the purpose of specified business carried on by the assesse to claim under this section. | Assessee engaged in specified business
w.e.f 1-4-2021 if such assessee opts | The specified business should not be set up by splitting up, or the reconstruction, of the business already in existence or it is not set up by the transfer of machinery or plants previously used for any purpose.
(However any machinery or plant used out of India is imported in India shall not be considered as machinery or plant used for any purpose as above, provided such plant and machinery was not at any time prior to such installation were used in India or no deduction on account of depreciation in respect of such machinery or plant has been allowed or was allowable to any person for any period prior to the date of installation of machinery or plant by the assessee.)
(Also where the value of plant and machinery or any part thereof previously used for any purpose is transferred to such specified business and the total value of such plant and machinery or part so transferred does not exceed 20% of the value of the total machinery or plant used in such business, then, the deduction under this section would not be denied). Assessees books of accounts should be audited.
In case of business of laying of pipe line for natural gas and crude and petroleum oil, the eligible assessee should make available such percentage of its total pipe line capacity as specified by petroleum and natural gas regulatory Board for use on common carrier basis for any person other than such assessee or its associated persons and that it should also fulfil any other conditions as may be prescribed. For the purpose of this clause associated person means - The one who participates directly or indirectly or through one or more intermediaries in the management or control or capital of the assessee
- The one who holds directly or indirectly shares carrying not less than 26% of the voting power in the capital of the assessee
- The one who appoints more than half of the Board of directors or members of the governing board or one or more executive directors or executive members of the governing board of the assessee.
- The one who guarantees not less than 10% of the total borrowings of the assessee.
Where the assessee builds a hotel of two stars and above category as classified by Central Government, while continue to own the hotel transfers the operation to another person deduction would still be allowed to such assessee.
Where the deduction is claimed under this provisions, no further deduction would be allowed either under the provision of section 10AA (w e f A.Y. 2015-16) and Chapter VI-A under the heading C in the same or any other previous year
Provisions contained in 80A(6) and sub-sections (7) and (10) of section 80-IA shall so far as may be, apply to this provision in respect of goods or services or assets held for the purpose of such business.
Any asset for which deduction is claimed and allowed shall be used for such specified business for a period of 8 years from the date on which such asset was acquired or constructed
If the asset is used for any other purpose other than the specified business for which the deduction is allowed than the total amount of deduction so claimed in one or more year and as reduced by depreciation allowable as per sec 32 shall be treated as income of the assessee chargeable under the head profit and gains from business or profession
The period of usage or usage other than specified business shall not be applicable in case of sick industrial companies.
Note : Any sum received in cash or kind on account of demolition, destroy, discarding or transfer of such assets where deduction under this clause has been allowed as a whole under this clause, the sum so received shall be chargeable to tax under the head business income (section 28(vii)).
Infrastructure facility means road, bridge or rail system, highway project including housing and other activity being integral part of such highway project , water supply project, water treatment system , irrigation , sanitation, sewerage system, solid waste management system, port, airport, inland water ways, inland ports or navigation channel in the sea. |
35CCA | Payment for carrying out Rural Development programmes
Payment to an association or institution | 100% of Expenditure incurred | All assessees | Payment to association or Institution undertaking the programme of rural development or training of persons shall not be allowed unless certificate from such institution is furnished stating that the programme of rural development had been approved before 01.03.1983 by approved authority and where such payment is made after 28th February 1983, such programme involves work of construction of any building or structure for use as dispensary, school, training or welfare centre or laying of road or construction or boring of a well or installation of any plant and machinery, where such work has commenced before 01.03.1983
Where the deduction is claimed and allowed for any assessment year in respect of any expenditure referred to in this section, no deduction shall be allowed for such expenditure u/s 80G or any other provision of this Act for the same or any other assessment year.
Rule 6AAA
(Deduction under this section shall not be denied for such payments made on the ground that subsequent to such payment, approval granted to such association or institution has been withdrawn) |
35CCC | Expenditure for agricultural extension project
Expenditure incurred on notified agricultural extension projects
Applicable from A.Y. 2013-14 | 100% of expenditure incurred w.e.f. AY 2021-2022 | All assessees | The agricultural extension project should be notified by the Board as per the guidelines issued. (see Rules 6AAD and 6AAE)
Where any deduction is allowed under this section no further deduction would be allowed under any other provisions of this Act for the same or any other assessment year |
35CCD | Expenditure on skill development project
Any expenditure incurred (other than cost of any land or building) on notified projects of skill development according to the guidelines issued in this regard. Applicable from A.Y.2013-14 | 100% of expenditure incurred w.e.f. AY 2021-2022 | Company | The skill development project should be notified by the Board as per the guidelines issued. (see Rules 6AAF to 6AAH
Where any deduction is allowed under this section no further deduction would be allowed under any other provisions of this Act. |
35D | Amortisation of expenses
Specified expenditure incurred either before the commencement of business or after the commencement of business in connection with the extension of undertaking or setting up a new unit.
Specified expenditure means:
1. Expenditure in connection with - Preparation of feasibility report
- Preparation of project report
- Conducting market or any survey necessary for business
- Engineering services relating to business
- Legal Charges for drafting agreement, for any purpose relating to setting up or conducting of business
- Such other expenditure as specified. Expenditure referred to in a-d should be incurred by the assessee himself or by a concern approved by the Board. In case of company, following expenses shall also be allowed:
- Legal charges for drafting MOA and AOA.
- Printing of MOA and AOA.
- Fees for registration of company as per Companies Act.
- In case of public subscription of shares and debentures, underwriting commission, brokerage, drafting, typing, printing and advertising of prospectus.
| One-fifth of such expenditure for a period of five years beginning with the year in which the business is commenced or extension of the undertaking is completed as the case may be. | Indian Companies or any person resident in India | The deduction is restricted to 5% of the cost of the project or where the assessee is an Indian company, at the option of the company, of the capital employed in the business of the company.
In case of a person other than a company or a co-operative society, the deduction would not be allowed unless the accounts of the assessee are audited for the year/s in which such expenditures are incurred and a report in prescribed form is furnished along with the return of income for the first year in which such deduction is claimed. (w.e.f A.Y. 21-22 before the date prescribed u/s 44AB of the Income Tax Act)
In case of amalgamation or demerger of the company the deduction would be allowed to amalgamated or resulting company and in such case no further deduction would be allowed to amalgamating or demerged company.
Where any deduction is allowed under this section no further deduction would be allowed under any other provisions of Act. |
35DD | Amortisation of expenses for amalgamation or demerger
Expenditure incurred wholly and exclusively for the purpose of amalgamation or demerger of an undertaking | One-fifth of such expenditure for a period of five successive years beginning with the previous year in which such amalgamation or demerger takes place. | Indian Company | No deduction would be allowed in respect of such expenses under any other provisions of this Act |
35DDA | Amortisation of expenses on VRS
Expenditure incurred by way of payment to an employee under any scheme in connection with his voluntary retirement | One-fifth of such expenditure for a period of five years beginning with the year which such expenditure is actually paid. | All assessees | The expenditure should be incurred in accordance with any scheme of voluntary retirement.
In case of amalgamation or demerger of the company the deduction would be allowed to the amalgamated or resulting company as if the deduction were allowed to amalgamating or demerged company as the case may be.
Whereas in case of partnership firm or proprietary concern is succeeded by the company in reorganization of business the deduction would be allowed to such succeeded company provided conditions laid down in provisions of section 47(xiii) or section 47(xiv) as applicable are adhered to. And no further deduction would be allowed to the partnership firm or proprietary concern as the case may be.
Whereas in case of a private limited company or unlisted public company under reorganisation of business is succeeded by a limited liability partnership fulfilling the conditions laid down in proviso to clause (xiiib) of section 47, then the deduction shall be allowed to the successor limited liability partnership and no further deduction would be allowed to private limited company or unlisted public company as the case may be. (applicable from A.Y. 2011-12)
Once the deduction under this section allowed, no deduction shall be allowed in respect of such expenditure under any other provisions of this Act. |
35E | Expenditure on Prospecting of Certain Mineral
Expenditure in respect of operations relating to prospecting for or extracting or production of any mineral or group of associated minerals or for development of mine or other natural deposit of such mineral or group of associated minerals. | One-tenth of such expenditure for a period of ten years beginning from the year in which commercial production starts or the expenditure as is sufficient to reduce the income to Nil as computed before allowing deduction under this clause whichever is lesser (however portion of expenditure not allowed in any previous year shall be carried forward and added to the installment of succeeding previous year up to last year of such deduction) | Indian companies or any other person resident in India. | Such minerals/group of associated minerals should be specified in Part A/B of Seventh Schedule of the Income-tax Act, 1961.
Deduction is allowed in respect of expenditure incurred in the year in which the production commences, or any expenses incurred in any four years preceding such year.
For the purpose of this clause expenditure met by any other persons, authorities or sales or salvage or compensation, insurance claim received in respect of any property or rights brought into existence shall be excluded from such expenditure.
Similarly expenditure incurred for acquisition of any sites, or deposits of minerals, or capital expenditure on acquisition of plant and machineries, building and furniture on which depreciation u/s 32 is allowable shall also be excluded from such expenditure.
In case of a person other than company or a co-operative society, the deduction would not be allowed unless the accounts of the assessee are audited and a report in prescribed form is furnished along with the return of income for the first year in which such deduction is claimed. See Form 3AE, Rule 6AB. (w.e.f A.Y. 21-22 before the date prescribed u/s 44AB of the Income Tax Act)
In case of amalgamation or demerger of the company the deduction would be allowed to amalgamated or resulting company and in such case no further deduction would be allowed to amalgamating or demerged company.
Once the deduction under this section allowed the same shall not be allowed under any other provisions of this Act. |
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