Section 45 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 45 allows deductions for scientific research in three ways: expenditure on research related to the assessee's business, expenditure on an approved in-house research and development facility by a company, and sums paid to research associations, universities, approved companies and national laboratories. Schedule XIII lists the articles that keep a manufacturer outside the in-house route. This article explains the section and the Schedule as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
Section 45(1): a deduction for capital (other than land) and revenue expenditure on scientific research related to the assessee's business, with a look-back of three years before commencement for salary and materials. Section 45(2): a company in bio-technology or in manufacture of an article not in Schedule XIII gets a deduction on an approved in-house R&D facility. Section 45(3): sums paid to research associations, universities, approved companies, national laboratories and similar bodies. No double deduction. The conditions, approvals and forms are left to the rules.
Where this section sits
Section 45 is in Part D of Chapter IV. It follows section 44 on preliminary expenses, in the article on section 44, and is followed by section 46, in its own article. Depreciation on an asset that ceases to be used for research is dealt with in section 33; see our post on Section 33. If you run research or product development in a company, our tax planning advisory team can look at which route applies.
Section 45(1): research related to the business
(a) The deduction
A deduction is allowed for any expenditure, being in the nature of (i) capital expenditure, but not on acquisition of land acquired as such or as part of any property, or (ii) revenue expenditure, incurred on scientific research related to the business of the assessee, subject to the provisions of the section. For this purpose "land" includes any interest in land (section 45(11)(d)).
(b) Before business starts: salary and materials
A deduction is also allowed for the aggregate of expenditure (not being capital expenditure), related to business, incurred on (i) salary to an employee engaged in the research or (ii) purchase of materials used in the research, where the expenditure is incurred within three years immediately preceding the commencement of business, to the extent certified by the prescribed authority as incurred on such research. It is deemed to have been incurred in the tax year in which the business is commenced.
(c) Pre-commencement capital expenditure
The aggregate of capital expenditure incurred within three years immediately preceding commencement of business is deemed to be incurred in the tax year in which the business commences.
Example: pre-commencement research
Nirmal Bio (invented) incurs Rs. 3,00,000 on the salary of research staff and Rs. 2,00,000 on research materials within three years before it starts its business; the prescribed authority certifies Rs. 4,50,000 as incurred on research. The deduction under section 45(1)(b) is the certified part, Rs. 4,50,000, and it is deemed to be incurred in the tax year in which the business commences. The remaining Rs. 50,000 (5,00,000 minus 4,50,000) is not covered by that clause because it is not certified.
Section 45(2): in-house research and development by a company
- (i) A deduction is allowed for expenditure on scientific research (not being the cost of any land or building) by a company engaged in the business of (A) bio-technology, or (B) manufacture or production of any article or thing not specified in Schedule XIII, on an in-house research and development facility as approved by the prescribed authority, subject to the conditions and manner as may be prescribed.
- (ii) No deduction under this sub-section for a company approved under sub-section (3)(b)(ii).
- (iii) No deduction for the same expenditure under any other provision.
- (iv) The expenditure is allowed subject to conditions and on furnishing documents in the form and manner as may be prescribed.
- (v) For drugs and pharmaceuticals, "expenditure on scientific research" includes expenditure on clinical drug trial, obtaining approval from any regulatory authority under a Central, State or Provincial Act, and filing an application for a patent under the Patents Act, 1970.
Schedule XIII: the list of articles or things
Schedule XIII is headed "List of articles or things" and is brought in by section 45(2). Clause (2)(i)(B) covers the manufacture or production of an article or thing "not specified in Schedule XIII", so an article in this list is outside that limb.
| Serial number | Article or thing |
|---|---|
| 1 | Beer, wine and other alcoholic spirits |
| 2 | Tobacco and tobacco preparations, such as cigars and cheroots, cigarettes, biris, smoking mixtures for pipes and cigarettes, chewing tobacco and snuff |
| 3 | Cosmetics and toilet preparations |
| 4 | Tooth paste, dental cream, tooth powder and soap |
| 5 | Aerated waters in the manufacture of which blended flavouring concentrates (including synthetic essence) in any form are used |
| 6 | Confectionery and chocolates |
| 7 | Gramophones, including record players, and gramophone records |
| 8 | Projectors |
| 9 | Photographic apparatus and goods |
| 10 | Office machines and apparatus such as typewriters, calculating machines, cash registering machines, cheque writing machines, intercom machines and teleprinters, including all machines and apparatus used in offices, shops, factories, workshops, educational institutions, railway stations, hotels and restaurants for doing office work and for data processing, including calculating machines and calculating devices not being computers |
| 11 | Steel furniture, whether made partly or wholly of steel |
| 12 | Safes, strong boxes, cash and deed boxes and strong room doors |
| 13 | Latex foam sponge and polyurethane foam |
| 14 | Crown corks, or other fittings of cork, rubber, polyethylene or any other material |
| 15 | Pilfer-proof caps for packaging or other fittings of cork, rubber, polyethylene or any other material |
Section 45(3) to (5): payments to research bodies
A deduction is allowed for any sum paid to:
| Clause | Payee | Purpose |
|---|---|---|
| (a)(i) | A research association having the object of undertaking scientific research, or a University, college or institution | To be used for scientific research |
| (a)(ii) | A research association having the object of undertaking research in social science or statistical research, or a University, college or institution | To be used for research in social science or statistical research |
| (b) | A company registered in India with the main object of scientific research and development, and approved by the prescribed authority | As the Act provides, subject to conditions as may be prescribed |
| (c) | A national laboratory, a University, an Indian Institute of Technology or a specified person | With a specific direction that the sum be used for scientific research under a programme approved by the prescribed authority |
Sub-section (4). The expenditure is allowed subject to conditions and on furnishing documents as may be prescribed. For clause (a), only an association, University, college or institution that for the time being is approved in the prescribed manner and is specified by the Central Government by notification is eligible. What has been notified is not in the text consulted.
Sub-section (5). The deduction for a sum under sub-section (3) is not denied merely because, after the payment, the approval to the entity or the programme under (3)(c) has been withdrawn.
Section 45(6) to (11): other rules
- (6) Where a deduction is allowed under section 45 for expenditure represented wholly or partly by an asset, no deduction is allowed under section 33(3) for that asset in the same or any other tax year.
- (7) Section 33(11) on depreciation applies to deductions for capital expenditure under sub-section (1).
- (8) No deduction for the sum in sub-section (3)(c) under any other provision.
- (9) Questions on whether, and to what extent, an activity is scientific research, or an asset is used for it, are referred by the Board to the Central Government (for activities under (3)(a), whose decision is final) or the prescribed authority (for other activities, whose decision is final).
- (10) When an amalgamating company sells or transfers to an Indian amalgamated company an asset representing capital expenditure on scientific research, section 45 applies to the amalgamated company as it would have to the amalgamating company.
- (11) Definitions: "National Laboratory" means a scientific laboratory functioning at the national level under the aegis of the Indian Council of Agricultural Research, the Indian Council of Medical Research, the Council of Scientific and Industrial Research, the Defence Research and Development Organisation, the Department of Electronics, the Department of Bio-Technology or the Department of Atomic Energy, and approved as such in the prescribed manner; "salary" has the meaning in section 16 read with section 18, with clauses (e) and (j) of section 16 omitted and the references in section 18 adapted; "specified person" means a person approved by the prescribed authority; and "land" includes any interest in land.
Example: a payment to a university
Kaveri Chemicals (invented) pays a sum to an Indian Institute of Technology with a specific direction that it be used for scientific research under a programme approved by the prescribed authority. It is allowed under section 45(3)(c). If the approval of the programme is withdrawn later, section 45(5) says the deduction is not denied for that reason alone. The sum cannot be claimed again under any other provision (sub-section (8)).
Need help with research and development claims?
Claims under section 45 depend on approvals, certificates and documents that must be in place before the claim is made. For planning and records, see our tax planning advisory service.
Key takeaways
- Section 45(1) allows capital (not land) and revenue expenditure on research related to the business, with a three-year look-back for salary and materials.
- Section 45(2) allows an approved in-house R&D deduction to a company in bio-technology or in manufacturing an article not in Schedule XIII.
- Section 45(3) allows payments to research associations, universities, approved companies, national laboratories and specified persons.
- Approvals, conditions and forms are left to the rules and to notification.
- An asset on which section 45 deduction is allowed does not qualify under section 33(3).
- No double deduction under any other provision for the same expenditure in (2) and (3)(c).
Read next
- Section 44: amortisation of certain preliminary expenses
- Section 46: capital expenditure of specified business
- Section 33: depreciation
- Section 16: definition of salary
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.