In-house Research may be either conducted by

1. Approved Company

2. Normal Business

Deduction Allowed is as follows

Expenditure on 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%

 

 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

 

  Section 35 Expenditure on In-house Research - Amendment November December 2016 Exams CA CS CMA - Deductions

 

In-house Research by Normal Business

1.Both Revenue and Capital Expenditure fully allowed 100%

2.However expenditure on land not allowed

 

Q1  

Particulars Amt
Gross Receipts 5000000
Less  
Expenses 4000000
PROFIT 1000000

Suppose Expenses Include Following Research Expenses

Particulars Amt
Expenditure on Pur of Land for Research 1400000
Expenditure on Construction of Building thereon 500000
Machine Purchased 400000
Salary to Researchers 200000
TOTAL 2500000
View Answer

Q2

Solve last question assuming it is a approved company

View Answer

 

Q3

Gross Receipts 5000000
Less  
Expenses 4000000
PROFIT 1000000

Machine purchased during year for Scientific Research of 200000

Expenses include 

Dep on Machine Rs 200000 @15% =30000

 

View Answer

 

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

FY(PY) Amt Spent
2010-11 100000
2011-12 130000
2012-13 160000
2013-14 190000
2014-15 220000
Total 800000

Business Actually commenced in 2014-15

Calculate deduction available each year

View Answer
  1. Income Tax
  2. PGBP Income
Ask Download

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides GST Training in Delhi. Register now.