The Indian government has introduced various provisions to promote research and development in the country. One such provision is Section 35CCC of the Income Tax Act, which provides tax benefits to companies that incur expenditure on research and development activities. This section was introduced in the year 2016, and it has been amended several times since then to provide more clarity and scope.
In this article, we will discuss the key provisions of Section 35CCC and how it benefits businesses in India.
What is Section 35CCC of the Income Tax Act?
Section 35CCC of the Income Tax Act provides a tax deduction to companies that invest in research and development activities in India. This deduction is available to companies engaged in the business of biotechnology, pharmaceuticals, and scientific research. The deduction is available for expenses incurred on scientific research and development activities approved by the Department of Scientific and Industrial Research (DSIR).
The objective of this section is to encourage companies to invest in research and development activities, which would ultimately lead to technological advancements and economic growth.
Who is eligible for tax benefits under Section 35CCC?
As mentioned earlier, the tax benefits under Section 35CCC are available to companies engaged in the business of biotechnology, pharmaceuticals, and scientific research. The following are the eligibility criteria to claim the tax benefits:
- The company should have a valid DSIR registration.
- The company should have incurred expenses on scientific research and development activities approved by DSIR.
- The company should have furnished the audit report along with the tax return, verifying the expenses incurred on scientific research and development activities.
What are the tax benefits under Section 35CCC?
Companies that incur expenses on scientific research and development activities approved by DSIR can claim a tax deduction of 150% of the expenditure incurred. This means that if a company has spent Rs. 100 on research and development activities, it can claim a tax deduction of Rs. 150. The deduction can be claimed for expenses incurred on or after 1st April 2017.
It is important to note that the tax deduction under Section 35CCC is over and above the tax deduction available under Section 80IA. The tax deduction under Section 80IA is available to companies engaged in infrastructure development projects.
What are the expenses that can be claimed under Section 35CCC?
The following are the expenses that can be claimed under Section 35CCC:
- Expenditure on scientific research and development activities approved by DSIR.
- Expenditure on the acquisition of technology from a foreign company, provided the technology is not available in India.
- Expenditure on the transfer of technology from an Indian company to a foreign company, provided the technology is not available in India.
- Any other expenditure incurred on scientific research and development activities approved by DSIR.
It is important to note that the expenses incurred on land and buildings cannot be claimed under Section 35CCC.
How to claim tax benefits under Section 35CCC?
To claim tax benefits under Section 35CCC, the company should follow the below steps:
- Obtain a valid DSIR registration.
- Incur expenses on scientific research and development activities approved by DSIR.
- Obtain an audit report verifying the expenses incurred on scientific research and development activities.
- File the tax return along with the audit report.
- Claim the tax deduction of 150% of the expenditure incurred on scientific research and development activities in the tax return.
Conclusion
In conclusion, Section 35CCC of the Income Tax Act provides tax benefits to companies engaged in the business of biotechnology, pharmaceuticals, and scientific research. The tax deduction of 150% of the expenditure incurred on scientific research and development activities approved by DSIR is an incentive for businesses to invest in research and development. The government’s objective behind introducing this provision is to encourage the growth of the research and development sector in India, which would ultimately lead to technological advancements and economic growth.
FAQs on Section 35CCC of the Income Tax Act:
- What is Section 35CCC of the Income Tax Act?
Section 35CCC of the Income Tax Act provides a tax deduction to companies that invest in research and development activities in India.
- Who is eligible for tax benefits under Section 35CCC?
Companies engaged in the business of biotechnology, pharmaceuticals, and scientific research are eligible for tax benefits under Section 35CCC. The company should have a valid DSIR registration and should have incurred expenses on scientific research and development activities approved by DSIR.
- What are the tax benefits under Section 35CCC?
Companies that incur expenses on scientific research and development activities approved by DSIR can claim a tax deduction of 150% of the expenditure incurred.
- What are the expenses that can be claimed under Section 35CCC?
The expenses that can be claimed under Section 35CCC include expenditure on scientific research and development activities approved by DSIR, expenditure on the acquisition or transfer of technology, and any other expenditure incurred on scientific research and development activities approved by DSIR.
- Is the tax deduction under Section 35CCC over and above the tax deduction available under other sections of the Income Tax Act?
Yes, the tax deduction under Section 35CCC is over and above the tax deduction available under other sections of the Income Tax Act.
- How can a company claim tax benefits under Section 35CCC?
To claim tax benefits under Section 35CCC, a company should obtain a valid DSIR registration, incur expenses on scientific research and development activities approved by DSIR, obtain an audit report verifying the expenses incurred, file the tax return along with the audit report, and claim the tax deduction of 150% of the expenditure incurred on scientific research and development activities in the tax return.
- What is the objective of Section 35CCC of the Income Tax Act?
The objective of Section 35CCC of the Income Tax Act is to encourage companies to invest in research and development activities, which would ultimately lead to technological advancements and economic growth.
