Section 45(3)(c) of the Income Tax Act, 2025 provides a deduction for sums paid to National Laboratories, Universities, Indian Institutes of Technology, or specified persons for scientific research undertaken under an approved programme. Understanding the approval process and compliance requirements is essential for sponsors seeking to claim this deduction.
The Scope of the Provision
Section 45(3)(c) allows deduction for sums paid to【30†L3-L7】:
- National Laboratory: A scientific laboratory functioning at the national level under the aegis of specified research councils
- University: A University established or incorporated by or under a Central Act or State Act
- Indian Institute of Technology: As defined in section 3(g) of the Institutes of Technology Act, 1961
- Specified person: Such person approved by the prescribed authority
The sum must be paid with a specific direction that it shall be used for scientific research undertaken under a programme approved by the prescribed authority.
The Prescribed Authority
For the purposes of Section 45(3)(c)【30†L3-L7】:
- For National Laboratories, Universities, and IITs: The head of the National Laboratory or the University or the Indian Institute of Technology, as the case may be, shall be the prescribed authority
- For specified persons: The Principal Scientific Adviser to the Government of India shall be the prescribed authority
Approval Process
Application
The application for obtaining approval of scientific research programme under Section 45(3)(c) shall be made by a sponsor in Form No. 7【30†L15】.
Scrutiny
The prescribed authority shall, if satisfied that it is feasible to carry out the scientific research programme, pass an order in writing in Form No. 8, approving such programme within two months from the end of the month in which application is received【30†L17-L19】.
Period of Approval
The approval shall be effective for such period not exceeding five tax years【30†L18-L19】. The sponsor may apply for a fresh order at least three months before the expiry of the effective period【30†L73-L75】.
Rejection
A reasonable opportunity of being heard shall be granted to the sponsor before rejecting an application【30†L24】.
Conditions for Approval
Nature of Programme
The programme should not relate purely to【30†L34-L35】:
- Market research
- Sales promotion
- Quality control
- Testing
- Commercial production
- Style changes
- Routine data collection
- Activities of a like nature
Separate Account
The National Laboratory, University, Indian Institute of Technology, or specified person shall maintain a separate account for each approved programme【30†L36-L37】.
Audit of Accounts
The account shall be audited annually and a copy thereof shall be furnished to the Chief Commissioner of Income-tax having jurisdiction over the sponsor on or before the due date specified in section 263(1)(c) for furnishing the return of income, for each succeeding tax year【30†L38-L40】.
Progress Report
A report in Form No. 10 shall be submitted by the prescribed authority within a period of three months from the date of granting approval to the programme showing progress of implementation and actuals of expenditure incurred【30†L44-L46】.
Completion Certificate
A completion certificate along with a copy of the report on the research activities carried out and salient features of the result obtained shall be submitted on completion of the approved programme【30†L48-L50】.
Audited Statement of Accounts
A copy of the audited statement of accounts for the approved programme shall be submitted within six months of the completion of the programme【30†L51-L52】.
No Extension or Escalation
The prescribed authority shall not extend the duration of the programme or approve any escalation in costs【30†L54-L55】.
Disposal of Assets
The assets acquired for executing the approved programme shall not be disposed of without the approval of the Chief Commissioner of Income-tax having jurisdiction over the sponsor【30†L56-L57】.
Reporting Requirements
Receipt of Payment
The National Laboratory, University, Indian Institute of Technology, or specified person shall issue a receipt of payment for carrying out an approved programme of scientific research in Form No. 9【30†L59-L60】.
Progress Report
A report in Form No. 10 shall be submitted by the prescribed authority within three months of granting approval【30†L44-L46】.
Completion Certificate
A completion certificate shall be submitted on completion of the approved programme【30†L48-L50】.
Audited Statement of Accounts
A copy of the audited statement of accounts shall be submitted within six months of completion【30†L51-L52】.
Expert Legal Guidance
Understanding the approval process and conditions for research programmes under Section 45(3)(c) is essential for sponsors seeking to claim deductions for scientific research. Anuj Desai & Associates provides expert advisory services on Direct Tax Code compliance, helping sponsors navigate the approval process and ensure compliance with all conditions.