Section 35 of the Income Tax Act in India contains specific guidelines regarding deductions for scientific research expenditure. Understanding this framework helps companies maintain audit-ready accounts.
Core Financial Concepts
Companies must distinguish between revenue expenditure (salaries, materials, utilities used directly in research) and capital expenditure (lab equipment, testing hardware). Land acquisitions are generally excluded from R&D capital deductions.
The Documentation Requirement
To support a claim under Section 35, the organization must show a direct link between the expenditures incurred and the actual scientific R&D activity. Vague expense classifications without corresponding project logs, timesheets, or testing reports can lead to audits and queries.
We recommend having your R&D documentation audited by compliance experts to ensure your financial and technical records are aligned before filing.
