Expenditure on scientific research
[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 45(1) of Income Tax Act 2025
45(1) A deduction shall be allowed for any expenditure, being in the nature of––
- (a) capital expenditure, but not on acquisition of land, as such or as part of any property; or
- (b) revenue expenditure; or
- (c) both,
incurred on scientific research related to the business of the assessee subject to provisions of this section.
Section 45(2) of Income Tax Act 2025
45(2)(a) A deduction shall be allowed under sub-section (1) in respect of the aggregate of expenditure (not being in the nature of capital expenditure), related to business, incurred on—
- (i) salary to an employee engaged in such scientific research; or
- (ii) purchase of materials used in such scientific research,
where such 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, expenditure shall be deemed to have been incurred in the tax year in which the business is commenced.
45(2)(b) For the purposes of sub-section (1), the aggregate of capital expenditure incurred within three years immediately preceding the commencement of business shall be deemed to have been incurred in the tax year in which the business is commenced.
45(2)(c)(i) A deduction shall be allowed under sub-section (1), in respect of any expenditure incurred (not being expenditure in the nature of 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, which is not specified in Schedule XIII, on in-house research and development facility as approved by the prescribed authority, subject to the conditions and manner, as prescribed;
(ii) No deduction shall be allowed under this clause to a company approved under sub-section (3)(b)(ii);
(iii) No deduction shall be allowed in respect of the expenditure mentioned in sub-clause (i) under any other provision of this Act;
(iv) The expenditure under sub-clause (i) shall be allowed subject to such conditions and on furnishing of documents in such form and manner, as prescribed;
45(2)(d) For the purposes of clause (c), expenditure on “scientific research”, in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central Act or State Act or Provincial Act and filing an application for a patent under the Patents Act, 1970.
Section 45(3) of Income Tax Act 2025
45(3) A deduction shall be allowed for any sum, paid to—
- 45(3)(a)(i) a research association having the object of undertaking scientific research or to a University, college or institution to be used for scientific research; or
- (ii) a research association having the object of undertaking research in social science or statistical research or to a University, college or institution to be used for research in social science or statistical research;
- 45(3)(b) a company which is––
- (i) registered in India having the main object of scientific research and development; and
- (ii) approved by such authority, in such manner and subject to such conditions, as prescribed;
- 45(3)(c)(i) a national laboratory; or
- (ii) a University; or
- (iii) an Indian Institute of Technology; or
- (iv) a specified person,
with a specific direction that the said sum shall be used for scientific research undertaken under a programme approved in this behalf by the prescribed authority.
Section 45(4) of Income Tax Act 2025
45(4) For the purposes of sub-section (3),––
- (a) the expenditure shall be allowed subject to such conditions and on furnishing of documents in such form and manner, as prescribed; and
- (b) in respect of clause (a) of the said sub-section, only such association, University, college or other institution shall be eligible for deduction, which for the time being is approved in the manner and subject to such conditions, as prescribed, and is specified by the Central Government, by notification.
Section 45(5) of Income Tax Act 2025
45(5) The deduction for any sum under sub-section (3) shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee, the approval granted to such entities or the programme undertaken by entities as mentioned in sub-section(3)(c), has been withdrawn.
Section 45(6) of Income Tax Act 2025
45(6) Where a deduction is allowed for any tax year under this section in respect of expenditure, represented wholly or partly by an asset, no deduction shall be allowed under section 33(3) for the same or any other tax year in respect of that asset.
Section 45(7) of Income Tax Act 2025
45(7) The provisions of section 33(11) in respect of depreciation shall apply in relation to deductions allowable for capital expenditure under sub-section (1).
Section 45(8) of Income Tax Act 2025
45(8) No deduction in respect of the sum mentioned in sub-section (3)(c) shall be allowed under any other provision of this Act.
Section 45(9) of Income Tax Act 2025
45(9) If any question arises under this section as to whether, and if so, to what extent any activity constitutes or constituted scientific research, or any asset is or was being used, for scientific research, the Board shall refer the question to—
- (a) the Central Government, when such question relates to any activity under sub-section (3)(a), and its decision shall be final;
- (b) the prescribed authority, when such question relates to any other activity, whose decision shall be final.
Section 45(10) of Income Tax Act 2025
45(10) When an amalgamating company, in a scheme of amalgamation, sells or otherwise transfers to the amalgamated company (being an Indian company) any asset representing capital expenditure on scientific research, the provisions of this section shall apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not so sold or otherwise transferred the asset.
Section 45(11) of Income Tax Act 2025
45(11) In this section,—
- (a) “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 which is approved as a National Laboratory by such authority and in such manner, as prescribed;
- (b) “specified person” means such person approved by the prescribed authority;
- (c) “land” includes any interest in land.
FAQs on Section 45 of Income Tax Act 2025
1. What is the objective of Section 45 of the Income Tax Act, 2025?
It allows deductions for revenue and capital expenditure incurred on scientific research related to the assessee’s business, subject to specific conditions and approvals.
2. Who can claim deductions under this section?
Any assessee (individual, firm, company, etc.) who incurs eligible scientific research expenses related to their business.
3. What types of scientific research expenditure are covered?
- Capital expenditure, excluding cost of land
- Revenue expenditure
- Expenditure paid to approved external institutions for scientific or social science research
4. Can land cost be claimed under scientific research?
No. Expenditure on acquisition of land is not allowed.
5. Is both in-house and outsourced research expenditure covered?
Yes. Deductions are allowed for both in-house research and contributions to approved external bodies.
6. Are expenses incurred before the start of the business eligible?
Yes. Revenue and capital expenditure incurred within 3 years before commencement of business is deemed to be incurred in the year of commencement, if certified appropriately.
7. What pre-commencement revenue expenses are allowed?
- Salary of employees engaged in research
- Cost of materials used in research
8. Who certifies pre-commencement expenditure?
The prescribed authority must certify such expenditure for deduction eligibility.
9. What special deduction is allowed for companies engaged in bio-technology or manufacturing?
Companies in these fields (excluding those producing items in Schedule XIII) are allowed deductions for expenditure on approved in-house R&D facilities, excluding land/building costs.
10. What are the conditions for this deduction?
- Must be a company
- Must engage in bio-tech or specified manufacturing
- Facility must be approved by prescribed authority
- Must comply with prescribed documentation and conditions
11. Can the same expense be claimed under another section?
No. Double deduction is not permitted under any other provision.
12. What qualifies as scientific research for pharmaceuticals?
Includes:
- Clinical drug trials
- Regulatory approval processes
- Patent application filing
13. Is deduction allowed for contributions to external research bodies?
Yes. Deductions are allowed for contributions made to:
- Approved research associations/universities/colleges
- Companies registered for R&D purposes
- National labs, IITs, or approved persons (under approved programmes)
14. What if the approval of such institution is withdrawn later?
The deduction is not denied merely because approval was withdrawn after payment was made.
15. Are there specific conditions and forms for such deductions?
Yes. Expenditure must meet prescribed conditions and be supported by documentation in prescribed form.
16. Can depreciation also be claimed on scientific research assets?
No. If capital expenditure is allowed under Section 45, no depreciation is allowed on the same under Section 33(3).
17. What if the asset is sold by the amalgamating company to an amalgamated company?
The deduction benefits transfer to the amalgamated company as if the transfer had not occurred.
18. Who decides if an activity qualifies as scientific research?
- Central Government (for contributions to research associations/universities)
- Prescribed authority (for all other scientific research activities)
Their decision is final.
19. What is a “National Laboratory”?
A lab under ICAR, ICMR, CSIR, DRDO, Dept. of Electronics, Bio-Tech, or Atomic Energy and approved in the prescribed manner.
20. What does “land” include?
Any interest in land – including leasehold, tenancy rights, etc.
21. Who is a “specified person”?
A person approved by the prescribed authority for carrying out scientific research under approved programmes.
22. Are there documentation requirements?
Yes. Claiming deductions requires furnishing specified documents in prescribed form and manner.
23. Can multiple deductions be claimed on the same expense?
No. Deduction once allowed under this section precludes claim under any other section.
24. Are social science or statistical research expenses allowed?
Yes, if paid to approved associations or institutions with those as their object.
Section 45 of the Income Tax Act, 2025 offers a comprehensive and structured incentive to promote scientific innovation and R&D in India. It enables businesses to claim deductions for both capital and revenue expenditure incurred on scientific research, including certain pre-commencement expenses. The provision also encourages collaboration with approved institutions, national laboratories, and in-house R&D, especially in sectors like biotechnology and manufacturing.
However, the benefit is subject to strict eligibility, documentation, certification, and approval requirements, ensuring that only genuine, business-related research activities are incentivised. Importantly, double deductions are prohibited, and careful planning is needed to optimise the claim under this section.
Overall, Section 45 reflects the government’s intention to strengthen the country’s research ecosystem by reducing the financial burden on businesses investing in innovation.
