Section 35(4) of the Income Tax Act is an important provision that provides for the allowance of expenditure incurred on scientific research. The section allows for a deduction of expenses incurred on scientific research and development activities from the total income of the taxpayer. In this blog, we will discuss the provisions of section 35(4) in detail, its applicability, and its benefits.
What is Section 35(4) of the Income Tax Act?
Section 35(4) of the Income Tax Act was introduced to encourage scientific research and development activities in India. It provides for a deduction of expenses incurred on scientific research and development activities from the total income of the taxpayer. The section allows for a deduction of 150% of the expenses incurred on scientific research and development activities. This means that the taxpayer can claim a deduction of 150% of the expenses incurred on scientific research and development activities.
Applicability of Section 35(4)
The provisions of section 35(4) are applicable to all taxpayers, including individuals, HUFs, firms, companies, and other entities. However, the expenses claimed under this section should be related to scientific research and development activities conducted in India. The expenses should also be incurred wholly and exclusively for the purpose of scientific research and development activities.
Benefits of Section 35(4)
The benefits of section 35(4) are significant for taxpayers who are engaged in scientific research and development activities. Some of the key benefits of this section are:
- Increased Deduction: The deduction allowed under section 35(4) is 150% of the expenses incurred on scientific research and development activities. This provides a significant boost to the taxpayer’s cash flow and profitability.
- Encouragement of Scientific Research and Development Activities: The provisions of section 35(4) are aimed at encouraging scientific research and development activities in India. This is in line with the government’s goal of promoting innovation and technology development in the country.
- Reduced Tax Liability: The deduction allowed under section 35(4) reduces the taxpayer’s taxable income, which in turn reduces their tax liability. This provides an added benefit to the taxpayer.
How to claim deduction under Section 35(4)
To claim a deduction under section 35(4), the taxpayer needs to fulfill the following conditions:
- The expenses should be related to scientific research and development activities conducted in India.
- The expenses should be incurred wholly and exclusively for the purpose of scientific research and development activities.
- The taxpayer should maintain proper records and documents to support their claim for deduction.
In conclusion
section 35(4) of the Income Tax Act provides significant benefits to taxpayers who are engaged in scientific research and development activities. The deduction allowed under this section is 150% of the expenses incurred on scientific research and development activities. This provides a significant boost to the taxpayer’s cash flow and profitability. The provisions of section 35(4) are aimed at encouraging scientific research and development activities in India and promoting innovation and technology development in the country. To claim a deduction under section 35(4), the taxpayer needs to fulfill certain conditions and maintain proper records and documents.
Read more useful content:
- section 145 of income tax act
- section 10e of income tax act
- section 9 of the income tax act
- section 94b of income tax act
- section 206aa of income tax act
Frequently Asked Questions (FAQs)
Q: What is section 35(4) of the Income Tax Act?
A: Section 35(4) of the Income Tax Act provides for a deduction of expenses incurred on scientific research and development activities from the total income of the taxpayer. The deduction allowed under this section is 150% of the expenses incurred.
Q: Who can claim deduction under section 35(4)?
A: The provisions of section 35(4) are applicable to all taxpayers, including individuals, HUFs, firms, companies, and other entities, who incur expenses on scientific research and development activities in India.
Q: What expenses are eligible for deduction under section 35(4)?
A: The expenses incurred on scientific research and development activities in India are eligible for deduction under section 35(4). The expenses should be incurred wholly and exclusively for the purpose of scientific research and development activities.
Q: What is the maximum deduction allowed under section 35(4)?
A: The deduction allowed under section 35(4) is 150% of the expenses incurred on scientific research and development activities.
Q: Is there any limit on the amount of expenses that can be claimed as deduction under section 35(4)?
A: There is no limit on the amount of expenses that can be claimed as deduction under section 35(4). However, the expenses claimed should be related to scientific research and development activities conducted in India and should be incurred wholly and exclusively for the purpose of scientific research and development activities.
Q: How can one claim deduction under section 35(4)?
A: To claim deduction under section 35(4), the taxpayer needs to fulfill certain conditions and maintain proper records and documents. The taxpayer should ensure that the expenses claimed are related to scientific research and development activities conducted in India and are incurred wholly and exclusively for the purpose of scientific research and development activities.
Q: Can a taxpayer claim deduction under section 35(4) along with deduction under other sections of the Income Tax Act?
A: Yes, a taxpayer can claim deduction under section 35(4) along with deduction under other sections of the Income Tax Act, subject to fulfillment of the conditions prescribed under each section. However, the total deduction claimed should not exceed the total income of the taxpayer.
Q: What is the objective of section 35(4) of the Income Tax Act?
A: The objective of section 35(4) is to encourage scientific research and development activities in India and promote innovation and technology development in the country. The deduction allowed under this section provides a significant boost to the taxpayer’s cash flow and profitability, thereby encouraging them to invest in research and development activities.
