As a taxpayer, it’s important to understand the various provisions of the Income Tax Act that govern the computation and assessment of your tax liability. One such provision is Section 35(1)(i), which pertains to expenditure incurred on scientific research.
In this blog, we will take a closer look at Section 35(1)(i) of the Income Tax Act, its provisions, and the implications for taxpayers.
Understanding Section 35(1)(i)
Section 35(1)(i) of the Income Tax Act provides for the deduction of expenses incurred on scientific research. According to the provision, any expenditure incurred on scientific research that is approved by the prescribed authority is eligible for deduction from the taxpayer’s taxable income.
The provision covers a wide range of expenses related to scientific research, including the cost of equipment, materials, salaries of research personnel, and other expenses directly related to the research project. However, it’s important to note that expenses related to the acquisition of land or buildings, or any other capital expenditure, are not eligible for deduction under this provision.
To claim the deduction under Section 35(1)(i), the taxpayer must obtain a certificate from the prescribed authority certifying that the research project is approved for the purposes of this provision. The certificate must be obtained before the due date for filing the tax return for the relevant assessment year.
Implications for Taxpayers
The deduction available under Section 35(1)(i) of the Income Tax Act can be a significant tax-saving opportunity for taxpayers engaged in scientific research. By claiming this deduction, taxpayers can reduce their taxable income, and consequently, their tax liability.
However, it’s important to note that the deduction is available only for expenses incurred on scientific research that is approved by the prescribed authority. Taxpayers must therefore ensure that they obtain the necessary approvals before claiming the deduction.
Furthermore, taxpayers must maintain proper records and documentation of the expenses incurred on the research project. This includes invoices, bills, receipts, and other relevant documents, which may be required by the tax authorities to verify the expenditure claimed.
Conclusion
Section 35(1)(i) of the Income Tax Act provides for the deduction of expenses incurred on scientific research. The provision covers a wide range of expenses related to scientific research, and the deduction can be a significant tax-saving opportunity for taxpayers engaged in such research. However, taxpayers must ensure that they obtain the necessary approvals and maintain proper records to claim the deduction under this provision.
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Frequently Asked Questions (FAQs)
Q.1 What is Section 35(1)(i) of the Income Tax Act?
Section 35(1)(i) of the Income Tax Act provides for the deduction of expenses incurred on scientific research that is approved by the prescribed authority.
Q.2 What expenses are eligible for deduction under Section 35(1)(i)?
Expenses directly related to the research project, such as the cost of equipment, materials, salaries of research personnel, and other expenses, are eligible for deduction. However, expenses related to the acquisition of land or buildings or any other capital expenditure are not eligible.
Q.3 Who can claim a deduction under Section 35(1)(i)?
Any taxpayer who incurs expenses on scientific research approved by the prescribed authority can claim a deduction under this provision.
Q.4 How much deduction can be claimed under Section 35(1)(i)?
There is no specified limit on the amount of deduction that can be claimed under this provision. However, the amount of deduction claimed should be supported by proper documentation and should be reasonable and justifiable.
Q.5 What is the prescribed authority for the purpose of Section 35(1)(i)?
The prescribed authority for the purpose of Section 35(1)(i) is the Department of Scientific and Industrial Research (DSIR) or the National Committee for Scientific Research (NCSR).
Q.6 What documents are required to claim a deduction under Section 35(1)(i)?
To claim a deduction under Section 35(1)(i), the taxpayer must obtain a certificate from the prescribed authority certifying that the research project is approved for the purposes of this provision. Additionally, the taxpayer must maintain proper records and documentation of the expenses incurred on the research project.
Q.7 When should the certificate be obtained from the prescribed authority?
The certificate from the prescribed authority should be obtained before the due date for filing the tax return for the relevant assessment year.
Q.8 Can the deduction under Section 35(1)(i) be carried forward?
Yes, any unclaimed deduction under Section 35(1)(i) can be carried forward for up to 7 assessment years.
Q.9 Can the deduction under Section 35(1)(i) be claimed by a partnership firm?
Yes, a partnership firm can claim a deduction under Section 35(1)(i) for expenses incurred on scientific research approved by the prescribed authority.
Q.10 Can the deduction under Section 35(1)(i) be claimed by a non-resident taxpayer?
Yes, a non-resident taxpayer can claim a deduction under Section 35(1)(i) for expenses incurred on scientific research approved by the prescribed authority, provided such expenditure is attributable to the business carried on in India.
