Moment guide · FY 2026-27

I am claiming scientific research expenditure

What is the deduction for in-house R&D under section 35?

Own scientific research expenditure is 100% deductible under section 35(1)(i), and contributions to approved research institutions under 35(1)(ii) are also 100%. Only DSIR-approved biotech and notified pharma companies get the weighted 150% under section 35(2AB) — reduced from 200% by Finance Act 2016 — and the weighted deduction requires the DSIR certificate.

The #1 trap

Claiming 150% without DSIR approval — the weighted deduction under section 35(2AB) exists only for DSIR-approved biotech and notified pharma companies, and it dropped from 200% to 150% in 2016, so old articles quoting 200% are stale. Without approval, in-house R&D is still 100% deductible, just not weighted.

Dr. Kavita's biotech company investing in R&D

Kavita's biotech company, which holds DSIR approval under the notified list, spends ₹40,00,000 on in-house scientific research in FY 2025-26, including salaries of researchers, laboratory equipment and consumables. Under section 35(2AB), the company claims a weighted deduction of 150% of the DSIR-approved expenditure, which is ₹40,00,000 multiplied by 1.5, equal to ₹60,00,000, provided the expenditure is certified by DSIR in Form 3CL. A friend's engineering firm without DSIR approval spends ₹15,00,000 on R&D for a new product; it cannot claim the 150% weighted deduction and instead deducts the full ₹15,00,000 under section 35(1)(i), because the weighted benefit is reserved for approved biotech and notified pharma companies. Kavita's company also contributes ₹5,00,000 to an approved university research department, which is deductible at 100% under section 35(1)(ii). If the company had claimed the weighted deduction without the DSIR certificate, the claim would be disallowed in scrutiny and the entire 35(2AB) benefit lost for the year. The 200% rate that older articles quote was reduced to 150% by Finance Act 2016, so the company budgets its R&D claim on the current law. Kavita files Form 3CL with the return and keeps the DSIR certificate, the expenditure schedule and the auditor's report together. A quick call with us dials in the final figure. Kavita also separates the capital expenditure on research from the revenue expenditure, because both are 100% deductible under 35(1)(i) in the year incurred, and the capital portion does not go through the depreciation schedule. If the DSIR certificate is obtained after the year-end, the weighted deduction is claimed from the year of the certificate, so companies time the approval before the return is filed. The DSIR-approved expenditure is capped at the amount certified, and the company claims 150% only of that certified figure; expenditure outside the certificate gets the plain 100% under 35(1). If the research project is abandoned and the assets are sold, the sale proceeds are taxable under the recapture rules, and the company tracks the cost already deducted. Contributions to an approved research association are 100% deductible under 35(1)(ii) only when the donee is approved under the rules, and the approval number is quoted in the return. She keeps the Form 3CL, the DSIR approval letter and the expenditure schedule together for scrutiny. A quick call with us dials in the final figure.