(Applicable from 01-06-2020]
The deduction under section 35 is allowed for the expenditure incurred on in-house scientific research or for payment to outsiders. If expenditure is incurred on in-house research and development, the deduction is allowed for revenue and capital expenditure provided research is related to business. Weighted deduction is allowed in certain cases if donation is made to outsider for doing scientific research, which may or may not be related to the business.
The Finance Bill, 2020 has proposed the following amendments to section 35.
(a) No denial of exemption
Deduction will not be denied merely on the ground that after the payment made by the assessee to these institutions, the approval granted to donee has been withdrawn or approval granted to scientific research programme of donee has been withdrawn. Earlier this benefit was available only to the entities mentioned in clause (ii) or clause (iii) of Section 35(1). The Finance Bill 2020 has proposed to extend this benefit to the Contribution to a company mentioned in clause (ha) of Section 35(1).
(b) Intimation to prescribed tax authorities
The deduction under this section is available if payment is made to the entities granted approval by the prescribed authority. It shall be deemed that notification granting approval to specified institutions shall be deemed to have been withdrawn unless the approved institution makes an intimation in the prescribed forms to the prescribed Income-tax authority within 3 months from the date on which this proviso comes into force. After such intimation the approval notification shall be valid for a period of 5 consecutive assessment years beginning with the assessment year commencing on or after the 1st day of April, 2021.
Further, an entity notified under section 35, after the date on which the Finance Bill, 2020 receives the assent of the President, shall, at any one time, have effect for such assessment year or years, not exceeding five assessment years as may be specified in the notification. This means that notification in respect of the entity shall be valid for a period not exceeding five previous years at one time calculated from 1st April, 2020.