Scientific Research explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 35 gives 100% deductions for scientific research in seven forms: own revenue and capital expenditure, sums paid to approved associations, universities and Indian companies, social science and statistical research, national laboratories and IITs, and in-house research and development.
From the ICAI Guidance Note on Tax Audit (Revised 2026), the concluding edition under the Income-tax Act, 1961; the summary table is stated as the law prevailing on 1 April 2025, applicable from A.Y. 2025-26. For tax years under the Income-tax Act, 2025 the corresponding provisions must be identified afresh; the report becomes Form No. 26 under rule 47 of the Income-tax Rules, 2026.
The seven routes
| Sub-section | Who and what | Quantum |
|---|---|---|
| 35(1)(i) | Assessees incurring expenditure for scientific research related to the business. Eligible: any expenditure not being capital expenditure laid out or expended during the previous year | 100% of the expenditure incurred |
| 35(1)(ii) | Sums paid to an approved research association whose object is scientific research, or to an approved university, college or other institution to be used for scientific research, notified in the Official Gazette | 100% of the sum paid |
| 35(1)(iia) | Sums paid to a company registered in India whose main object is carrying out scientific research and development, approved by the prescribed authority in the prescribed manner and fulfilling the prescribed conditions | 100% of the sum paid |
| 35(1)(iii) | Sums paid to an approved research association whose object is research in social science or statistical research, or to a university, college or other institution to be used for it, notified in the Official Gazette | 100% of the sum paid |
| 35(1)(iv) read with 35(2) | Capital expenditure on scientific research related to the business, other than expenditure on acquisition of land and any interest in land | 100% of the capital expenditure incurred |
| 35(2AA) | Sums paid to a National Laboratory, a University, an Indian Institute of Technology or a specified person approved by the prescribed authority, with a specific direction that the sum shall be used for scientific research under a programme approved by the prescribed authority | 100% of the sum paid |
| 35(2AB) | A company engaged in the business of bio-technology, or in any business of manufacture or production of any article or thing not specified in the Eleventh Schedule. Eligible: expenditure on in-house research and development facility approved by the prescribed authority, not being the cost of any land or building | 100% of the expenditure incurred |
The three-year pre-commencement rule
It appears in two of the sub-sections and works the same way in both:
- Section 35(1)(i) — expenditure laid out before the commencement of business on payment of salary to an employee engaged in scientific research or on purchase of materials used in such research, within the three years immediately preceding commencement, is deemed to have been expended in the previous year in which the business commences. Such expenditure has to be certified by the prescribed authority.
- Section 35(1)(iv) — capital expenditure incurred before commencement, within the three years immediately preceding, is likewise deemed expended in the year of commencement.
Where capital expenditure has been claimed under section 35, no depreciation shall be allowed on those assets. Paragraph 30.23 puts the corresponding duty on the auditor: wherever the full deduction of the cost of capital goods is allowed, verify that the cost of that asset is not included in the block of assets for depreciation. A clause 19 claim and a clause 18 block entry for the same asset is a double deduction visible across two clauses of the same report.
The reverse check matters too: an asset that was correctly kept out of the clause 18 block in an earlier year must stay out in this one.
What the auditor examines
Paragraph 31.7: the auditor should examine the eligibility of the expenditure or payment for deduction and compliance with the conditions prescribed in the sub-section, including approval from the relevant or prescribed authority, the notification issued by the Central Government, and any other guideline or circular. He should also refer to Rule 6 of the Income-tax Rules, 1962.
Paragraph 31.6: where the assessee is eligible under more than one sub-section of section 35, the deduction under each sub-section is stated separately in the applicable part — the amount deductible in respect of the amount debited to the profit and loss account, and the amount not debited.
The approval documents to obtain
| Route | Evidence |
|---|---|
| 35(1)(i) pre-commencement | Certificate of the prescribed authority for the three-year salary and materials expenditure |
| 35(1)(ii) and (iii) | The payee's approval and Official Gazette notification, current at the date of payment |
| 35(1)(iia) | The Indian company's certificate of incorporation and main object, plus its approval by the prescribed authority |
| 35(2AA) | The payee's status and approval, the approved programme, and the specific direction accompanying the payment |
| 35(2AB) | The company's business — bio-technology or non-Eleventh Schedule manufacture — and the approval of the in-house facility; segregate any land or building cost |
The sum must be paid with a specific direction that it shall be used for scientific research undertaken under a programme approved by the prescribed authority. A general donation to a National Laboratory or an IIT, without that direction and without an approved programme, does not satisfy the sub-section.
Where the deduction is not available
Paragraph 31.4: a company or co-operative society under section 115BA, 115BAA, 115BAB, 115BAD or 115BAE cannot claim 35(1)(ii), (iia), (iii), (2AA) or (2AB). An individual, HUF, AOP other than a co-operative society, BOI or artificial juridical person under the default regime in section 115BAC(1A) cannot claim 35(1)(ii), (iia), (iii) or (2AA). Note that 35(1)(i) — the assessee's own revenue expenditure on scientific research related to its business — is not in either bar list.
Worked example
| Item | Sub-section | Debited | Admissible |
|---|---|---|---|
| Salaries and consumables in the company's own research department | 35(1)(i) | Rs 92,00,000 | Rs 92,00,000 |
| Laboratory equipment purchased for that research | 35(1)(iv) | Nil — capitalised | Rs 1,40,00,000; excluded from the clause 18 block |
| Land bought for a research campus | — | Nil | Nil — land is excluded |
| Payment to an approved research association | 35(1)(ii) | Rs 25,00,000 | Rs 25,00,000, subject to current approval |
| Payment to an IIT with a specific direction under an approved programme | 35(2AA) | Rs 15,00,000 | Rs 15,00,000 |
| In-house approved R&D facility, of which Rs 30,00,000 is building cost | 35(2AB) | Rs 2,10,00,000 | Rs 1,80,00,000 — building excluded |
Audit checklist
- Report each sub-section separately, splitting debited and not-debited amounts.
- Obtain the payee's approval and Gazette notification current at the date of payment.
- Check the specific direction and approved programme for section 35(2AA).
- Confirm the Eleventh Schedule position and the facility approval for section 35(2AB), and strip out land and building.
- Exclude land and interest in land from section 35(1)(iv).
- Confirm the prescribed authority's certificate for pre-commencement expenditure.
- Remove the asset from the clause 18 block where its cost was allowed here.
- Check clause 8a — most of these routes are barred under a concessional regime.
Common mistakes
- Claiming depreciation as well on an asset allowed under section 35.
- Including land in section 35(1)(iv) capital expenditure.
- Including building cost in a section 35(2AB) claim.
- Relying on an approval that had lapsed at the date of payment.
- Reporting one combined figure across several sub-sections of section 35.