Section 45
Section 45: deduction for expenditure on scientific research
Section 45 allows businesses to deduct expenditure on scientific research connected to their business, gives companies an incentive for in-house research facilities in specified sectors, and allows a deduction for donations made to approved research bodies, universities and national laboratories for scientific or social-science research.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
In-house research related to the assessee's own business
Section 45(1)(a) allows a deduction for both capital expenditure (excluding cost of land) and revenue expenditure incurred on scientific research related to the assessee's business.
Section 45(1)(b) additionally allows, for pre-business expenditure (salary to research employees or purchase of research materials) incurred within the three years before commencing business, a deduction to the extent certified by the prescribed authority - deemed incurred in the year the business commences. Similarly, capital expenditure incurred within that same three-year window is deemed incurred in the year the business commences.
Special deduction for in-house R&D facilities (biotech/manufacturing companies)
Section 45(2) allows a company engaged in bio-technology, or in manufacture/production of an article or thing not specified in Schedule XIII, to deduct expenditure (excluding cost of land or building) on an in-house research and development facility approved by the prescribed authority, subject to prescribed conditions. This deduction is not available to a company already approved under Section 45(3)(b)(ii), and no deduction for the same expenditure is allowed under any other provision.
For drugs and pharmaceuticals, "expenditure on scientific research" under this sub-section is defined to include expenditure on clinical drug trials, obtaining regulatory approvals, and filing a patent application under the Patents Act, 1970.
Deduction for sums paid to research bodies
Section 45(3) allows a deduction for sums paid to:
- A research association undertaking scientific research, or a university/college/institution, to be used for scientific research.
- A research association undertaking research in social science or statistical research, or a university/college/institution, to be used for such research.
- A company registered in India with the main object of scientific research and development, and approved by the prescribed authority.
- A national laboratory, university, Indian Institute of Technology, or specified person, with a specific direction that the sum be used for scientific research under a programme approved by the prescribed authority.
Conditions and clarifications
Approval and documentation requirements are prescribed for these deductions (Section 45(4)).
The deduction under Section 45(3) is not denied merely because the recipient's approval, or the approved programme, is later withdrawn (Section 45(5)).
Where a deduction has already been allowed under this section for expenditure represented by an asset, no further depreciation deduction is allowed under Section 33(3) for that same asset (Section 45(6)); the depreciation-related carry-forward rule in Section 33(11) applies to capital expenditure deductions under this section (Section 45(7)).
No deduction for sums paid under Section 45(3)(c) (to national laboratories, universities, IITs, specified persons) is allowed under any other provision of the Act (Section 45(8)).
On amalgamation, the provisions continue to apply to the amalgamated Indian company as they would have applied to the amalgamating company, where a scientific-research asset is transferred (Section 45(10)).
Frequently asked questions
Can I deduct pre-business scientific research expenditure?
Yes - Section 45(1)(b) allows a deduction (to the extent certified by the prescribed authority) for research-employee salary or research material costs incurred within the three years before commencing business, and Section 45(1)(c) similarly covers capital expenditure incurred in that pre-business window; both are deemed incurred in the year the business commences.
Which companies get the special in-house R&D deduction under Section 45(2)?
Companies engaged in bio-technology, or in manufacture/production of an article or thing not specified in Schedule XIII, for expenditure (excluding land/building cost) on an in-house research and development facility approved by the prescribed authority.
Is a deduction for donations to a research institution lost if its approval is later cancelled?
No - Section 45(5) specifically provides that the deduction for a sum paid under Section 45(3) is not denied merely because the recipient's approval, or the research programme, is subsequently withdrawn after the payment was made.
Related sections
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Plan your R&D and scientific research deductions with our tax teamLast updated 9 September 2026