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Rule 29Published

Rule 29: Scientific research authorities and in-house R&D approval

Rule 29 identifies the authorities for the stated scientific-research provisions and sets the company in-house research facility approval process. The facility application, approval, annual accounts and expenditure reporting are separate requirements.

Official notified Income-tax Rules, 2026

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Bare law

Rule 29 - Prescribed authority and process of approval for expenditure on scientific research under section 45(1)(a)(ii) and (2)

(1) For the purposes of clause (b) read with clause (a)(ii) of section 45(1), the prescribed authority shall be Principal Chief Commissioner of Income tax (Exemptions) in concurrence with the Secretary, Department of Scientific and Industrial Research, Government of India.

(2) For the purposes of section 45(2),–– (a) the prescribed authority shall be Secretary, Department of Scientific and Industrial Research, Government of India; (b) no company shall be entitled for deduction under said section, unless it enters into an agreement with the prescribed authority for co-operation in research and development facility and fulfils such conditions with regard to maintenance of books of account and audit thereof and furnishing of reports in the manner provided in this rule; (c) the application for entering into an agreement specified in clause (b) shall be made by a company in Form No.11; (d) the prescribed authority shall,–– (i) if he is satisfied that the conditions mentioned in section 45(2) and specified in this sub-rule are fulfilled, pass an order in writing in Form No. 14, approving the facility within four months from the end of the month in which application is received; (ii) where an application is rejected, a reasonable opportunity of being heard shall be granted to the company; and (iii) furnish a copy of such order to the Chief Commissioner of Income-tax having jurisdiction over such company; (e) approval of expenditure incurred on in-house research and development facility by a company shall be subject to the following conditions,:— (i) the facility should not relate purely to market research, sales promotion, quality control, testing, commercial production, style changes, routine data collection or activities of similar nature; (ii) the prescribed authority shall furnish electronically its report–– (A) in relation to the approval of in-house research and development facility in Part A of Form No. 12; (B) quantifying the expenditure incurred on in-house research and development facility by the company during the tax year and eligible for deduction under section 45(2) in Part B of Form No. 12; (iii) the report in Form No. 12 referred to in sub-clause (ii) shall be furnished electronically by the prescribed authority to the Chief Commissioner of Income-tax having jurisdiction over such company within one hundred and twenty days,— (A) of the grant of the approval, in a case referred to in sub-clause (ii)(A); (B) of the submission of the audit report, in a case referred to in sub-clause (ii)(B); (iv) the company shall maintain separate books of account for each approved facility which shall be audited annually; (v) a report of audit in Form No. 13 shall be furnished electronically to the Secretary, Department of Scientific and Industrial Research on or before the due date specified in section 263(1)(c) for furnishing the return of income, for each succeeding tax year; (vi) the company shall attach copy of such audited annual account with the return of income to be filed under section 263(1)(a) for each tax year; (vii) the company shall ensure that the capital and revenue expenditure on in-house research and development facility is reflected in the schedules or notes to accounts in the audited financial statement of the company prepared for the purposes of its annual report and for the purposes of computation of income-tax; and (viii) the assets acquired by the approved facility shall be utilised only for the approved purpose and shall not be disposed of without the approval of the Secretary, Department of Scientific and Industrial Research.

(3) For the purposes of this rule, ―audited‖ means the audit of accounts by an accountant, as defined in section 515(3)(b).

Rule breakdown

Distinguish the two statutory routes

For section 45(1)(a)(ii), read with the reference in sub-rule (1), the prescribed authority is the Principal Chief Commissioner of Income-tax (Exemptions), acting in concurrence with the Secretary, Department of Scientific and Industrial Research. For section 45(2), the prescribed authority is that Secretary.

Identify the relevant route before preparing an application. The authority for one provision should not be substituted for the authority prescribed for the other.

Form 11 application and the research agreement

A company claiming under the stated section 45(2) route must enter the prescribed co-operation agreement and meet the conditions for accounts, audit and reports. Its application to enter the agreement is in Form No. 11.

The rule excludes facilities relating purely to the listed activities such as market research, sales promotion, quality control, testing, commercial production, style changes and routine data collection. Classify the facility’s actual research work and retain evidence.

Approval decision and the four-month clock

If satisfied that the Act and rule conditions are met, the authority passes the written approval in Form No. 14 within four months from the end of the month in which the application is received. A reasonable hearing opportunity must precede rejection.

The rule requires a copy of the order to the jurisdictional Chief Commissioner. Record receipt of the application and the decision separately; filing an application does not itself amount to approval.

Form 12 reports use two separate triggers

The prescribed authority reports electronically in Part A of Form No. 12 on facility approval and Part B on the expenditure incurred and eligible for deduction. The reports go to the jurisdictional Chief Commissioner within 120 days of the applicable trigger.

Part A uses the grant of approval; Part B uses submission of the audit report. A single date entered for both reports can misstate these different clocks.

Annual accounts and Form 13

Maintain separate books for each approved facility and have them audited annually by an accountant within the rule’s definition. Form No. 13 is furnished electronically to the DSIR Secretary by the return due date specified in the rule for each succeeding tax year.

The rule also states requirements for the copy of audited annual accounts with the return and for reflecting capital and revenue R&D expenditure in the financial statement schedules or notes. The notified section 263 cross-references are reproduced in the bare law; verify current filing instructions when implementing them.

Use and disposal of approved-facility assets

Assets acquired by the approved facility must be used only for the approved purpose. Disposal requires the DSIR Secretary’s approval.

Maintain an asset register linking acquisition, use and any proposed disposal to the approved facility. Annual expenditure reporting is not a substitute for the asset-use restriction.

Key takeaways

Correct authority

The two stated section 45 routes have different prescribed authorities.

Distinct forms

Form 11 application, Form 14 approval, Form 12 authority reports and Form 13 audit report serve separate roles.

Ongoing conditions

Separate annual accounts, reporting and restricted asset use continue after approval.

Practical checklist

  • Identify the applicable section 45 route.
  • Keep separate accounts and annual audit records for each facility.
  • Track the distinct application, approval and reporting dates.

Avoid

  • Do not treat the application as approval.
  • Do not merge the Part A and Part B reporting triggers.
  • Do not dispose of assets without the required approval.

FAQs

Which form is the company’s agreement application?

Form No. 11 under sub-rule (2)(c).

Do both Form 12 reports use the approval date?

No. Part A uses grant of approval; Part B uses submission of the audit report for their respective 120-day periods.

Can approved-facility assets be disposed of freely?

No. The rule requires approval of the Secretary, Department of Scientific and Industrial Research.

Glossary

Prescribed authority
The authority identified for the particular statutory route in Rule 29.
Approved facility
The research and development facility covered by the relevant approval and continuing conditions.

Official sources