Section 45 Income Tax Act 2025: Is Scientific Research Expenditure Deductible?

Section 45 of the Income-tax Act, 2025 provides deductions for eligible expenditure on scientific research, including certain revenue and capital costs, research undertaken before a business commences, qualifying in-house research facilities and payments to approved research institutions.

Current law: The Income-tax Act, 2025 came into force on 1 April 2026. This guide discusses Section 45 and should be read with the current statutory text, prescribed approvals, conditions and rules applicable to the relevant tax year.
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1. What scientific research expenditure is deductible under Section 45?

Under Section 45(1)(a), expenditure on scientific research related to the assessee's business may qualify for a deduction whether it is revenue expenditure or capital expenditure. However, capital expenditure on acquiring land, whether acquired separately or as part of property, is excluded.

The central requirement is a demonstrable connection between the scientific research and the business. General commercial spending is not deductible merely because it is described as innovation or research.

2. Can scientific research expenses incurred before business commencement be claimed?

Section 45(1)(b) covers specified non-capital expenditure incurred during the three years immediately preceding commencement of business. Eligible categories include salary paid to employees engaged in the scientific research and materials purchased for that research. The amount must be certified by the prescribed authority and is deemed incurred in the tax year in which the business commences.

Section 45(1)(c) similarly deems qualifying capital expenditure incurred during the three immediately preceding years to have been incurred in the tax year of commencement, subject to the other provisions of the section, including the exclusion for land.

3. What is the treatment of in-house research and development?

Section 45(2) provides for qualifying expenditure, other than the cost of land or buildings, on an approved in-house research and development facility of a company engaged in biotechnology or in manufacturing or producing eligible articles or things not listed in Schedule XIII. Approval, prescribed conditions and supporting documentation are essential.

Expenditure claimed under this provision cannot also be deducted under another provision of the Act. Companies falling within the separate approval category under Section 45(3)(b)(ii) are excluded from Section 45(2).

4. Payments to approved scientific research bodies

Section 45(3) addresses specified payments and contributions to eligible scientific research associations, universities, colleges, other institutions and approved research programmes, subject to the statutory approval and other conditions. Taxpayers should verify the recipient's eligibility, the purpose of payment, and the precise applicable provision before claiming a deduction.

Under Section 45(5), an otherwise eligible deduction for a payment covered by subsection (3) is not denied merely because the approval of the recipient or programme is withdrawn after the payment.

5. Relevant statutory definitions and expressions

Scientific research: Research undertaken for the extension of knowledge in the fields of natural or applied science, including agriculture, animal husbandry and fisheries, as understood under the Act's definition and applicable provisions.
Revenue expenditure: Research-related operating expenditure, such as eligible staff costs, consumables and other running costs, rather than acquisition of a capital asset.
Capital expenditure: Expenditure on assets or facilities of a capital nature used for business-related scientific research, subject to Section 45's exclusions and anti-duplication rules.
Prescribed authority: The authority designated under applicable income-tax rules to certify research expenditure or approve facilities or activities where the section requires such certification or approval.
Tax year: The period used under the Income-tax Act, 2025 for computing and assessing income; timing matters particularly for pre-commencement research expenditure.

6. What restrictions apply to Section 45 deductions?

  • No deduction for land: The capital cost of acquiring land is outside the deduction under Section 45(1).
  • No double depreciation: Under Section 45(6), where a deduction is allowed for expenditure represented wholly or partly by an asset, depreciation under Section 33(3) cannot also be claimed for that asset.
  • Depreciation-related conditions: Section 45(7) applies the relevant provisions of Section 33(11) to qualifying capital expenditure.
  • No duplicate deduction: Section 45(8) prevents the specified sum under Section 45(3)(c) from being claimed again under another provision.
  • Technical classification: Under Section 45(9), disputed questions about whether an activity is scientific research, or whether an asset was used for it, are referred by the Board to the designated Central Government or prescribed authority, as applicable.
Compliance checklist: Maintain project descriptions, experiment records, invoices, employee allocation records, asset registers, payment proofs, approvals and certification documents. Check the current rules and prescribed forms before filing the return.

7. Practical examples

Example A: Research equipment

A manufacturer incurs Rs. 8,00,000 on laboratory equipment used exclusively for scientific research related to its business. The amount may qualify as capital research expenditure under Section 45(1), subject to statutory conditions. The same asset cannot separately receive the prohibited depreciation deduction.

Example B: Research before opening a business

A business commencing in tax year 2026-27 had incurred Rs. 3,00,000 in qualifying research staff salary and materials during the immediately preceding three-year period. Subject to certification and other conditions, the eligible expenditure is treated as incurred in the commencement tax year.

Example C: Land for a research laboratory

Purchase of land for a research laboratory is not eligible for the capital scientific research deduction under Section 45(1), even where the research itself relates to the business.

8. Relationship with the Income-tax Act, 1961

Section 45 of the Income-tax Act, 2025 broadly consolidates the scientific research deduction framework previously found in Section 35 of the Income-tax Act, 1961. Historical case law may assist interpretation where the language and statutory context remain comparable, but older deduction rates, approval requirements and procedural rules must not be assumed to apply unchanged.

Frequently asked questions

Is all scientific research expenditure deductible?

No. The research must satisfy the business nexus or the applicable approved-payment/facility provisions. Exclusions, certifications and restrictions can apply.

Can a business claim the cost of land used for research?

No. Section 45(1) excludes capital expenditure on acquiring land.

Can a company claim both a research deduction and depreciation on the same asset?

Section 45(6) restricts a separate depreciation claim under Section 33(3) where the relevant expenditure has already been allowed under Section 45.

Are pre-commencement research salaries eligible?

They can qualify if they relate to the business, fall within the three years immediately preceding commencement and satisfy the certification and other requirements of Section 45(1)(b).

Official statutory sources

Income Tax Department: Section 45 - Expenditure on scientific research

Income-tax Act, 2025 as amended by Finance Act, 2026 (official PDF)

Updated: 10 November 2026. This article is general legal information and should be read with the current Act, rules and notifications.