Revenue expenditure on scientific research
Revenue expenses related to in-house R&D are allowed as deductions under section thirty five. These include day-to-day expenses incurred wholly for scientific research.

• Salaries of scientists and technical staff are considered eligible
  
• Cost of raw materials used in experimental work is allowed
  
• Rent, power, and consumables directly linked to R&D qualify
  
• Expenditure must relate to the business activity of the company
  

Capital expenditure on scientific research
Capital expenses incurred for research purposes are deductible under section thirty five to the extent they are not on land. These are generally claimed in full in the year of incurrence.

• Expenditure on scientific equipment and R&D infrastructure is allowed
  
• Buildings used exclusively for research qualify for deduction
  
• Land cost is not eligible under the deduction provisions
  
• Must be incurred before commencement of production or in the business period
  

Payments to approved research institutions
Donations or payments made to approved scientific institutions or universities are eligible for weighted or full deduction under specified conditions.

• Contribution must be made to notified institutions under section thirty five one ii
  
• Donations to universities or research associations qualify for full deduction
  
• A certificate of donation from the institution must be obtained
  
• Institutions must be approved by the prescribed income tax authority
  

In-house R&D facility for manufacturing companies
Companies engaged in manufacturing and having in-house R&D recognized by the prescribed authority may claim specific deductions under section thirty five two AB.

• Recognition must be granted by the Department of Scientific and Industrial Research
  
• Only companies in notified sectors are eligible for weighted deductions
  
• Expenditure on in-house research and development is deductible
  
• Deduction is available only if the facility is duly approved
  

Compliance and documentation requirements
Companies must maintain adequate records to support their R&D deduction claims. This includes audit trails, approvals, and proper segregation of eligible expenses.

• Maintain separate books or ledgers for research-related transactions
  
• Obtain DSIR approval where required for in-house facility benefits
  
• Submit required audit reports and forms with income tax return
  
• Keep proof of payments, contracts, and invoices for scrutiny
  

Disallowance of dual benefits
R&D expenditure must not be claimed under multiple provisions or as part of cost of assets if deduction is already claimed under section thirty five.

• Cannot capitalize R&D asset and also claim deduction simultaneously
  
• Deduction not allowed for expenses claimed as cost under other heads
  
• Must clearly segregate eligible expenses from other business outlays
  
• Claims made without compliance may attract disallowance or penalty
  

Impact on book profits and tax audit reporting
Deductions claimed under section thirty five affect MAT calculation and must be disclosed under audit requirements. Proper treatment is required in both income tax and statutory audits.

• R&D deductions must be added back while computing book profits for MAT
  
• Reported under Clause 19 of Form 3CD during tax audit
  
• Disclosures must specify nature and quantum of research expenses
  
• Consistency with financial statements ensures transparency and compliance