# Scientific Research Expenditure [Section 35]
Section 35 incentivises scientific research, either carried on by the assessee himself or by contributing to approved research bodies.
## A. 100% Deduction — allowed under BOTH tax regimes
(Research related to the assessee's own business, incurred by the assessee)
| Section | Nature | Deduction |
|---|---|---|
| 35(1)(i) | Revenue expenditure on in-house scientific research | 100%. Expenditure incurred 3 years prior to commencement of business is also allowed — but only salary + cost of materials |
| 35(1)(iv) & 35(2)(ia) | Capital expenditure on in-house scientific research | 100%. Pre-commencement capital expenditure (within 3 years) also allowed |
Rules for capital expenditure:
- No depreciation can be claimed on the same expenditure (no double deduction).
- No deduction for cost of land; cost of building is deductible.
- Unabsorbed capital expenditure is carried forward and treated like unabsorbed depreciation (indefinite).
### Asset removed from scientific research purpose
- Sold directly (without using it for any other purpose): taxable as deemed profits u/s 41(3) = lower of (a) sale proceeds, or (b) deduction claimed u/s 35.
- Brought into normal business use: added to the block of assets at NIL [Expl. 1 to Sec. 43(1)] — i.e., no re-taxation.
## B. 100% Deduction — allowed ONLY under the Optional (old) tax regime
(Contributions/donations to outside bodies — need not relate to the assessee's business)
| Section | Contribution to |
|---|---|
| 35(1)(ii) | Approved/notified research association, university, college or institution for scientific research |
| 35(1)(iia) | An Indian company whose main object is scientific research (notified) |
| 35(1)(iii) | Approved/notified body for social science or statistical research |
| 35(2AA) | National Laboratory / University / IIT / specified person for approved scientific research programmes |
> Note: Deduction for contributions is still allowed even if the recipient body's approval is withdrawn later — the donor is not penalised.
## Key distinction
- In-house research (own business) → deduction under both regimes.
- Contributions to outside bodies → deduction only under the optional/old regime.