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    Research and development deduction (Section 35 / 35(2AB)) (35(2AB))

    The headline first: the famous 200% R&D super-deduction is gone. Since 1 April 2020, all the Section 35 research limbs, including the in-house R&D deduction under 35(2AB), give a flat 100% deduction, not a weighted multiplier. So the benefit now is timing and certainty (a full write-off of eligible R&D revenue and capital expenditure, excluding land and building), plus separate PLI grants, rather than an uplift. In-house R&D under 35(2AB) requires a DSIR-approved facility (in biotechnology or manufacturing outside the Eleventh Schedule) and the DSIR certification process (Forms 3CK, 3CM and 3CL).

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    What this relief is, in plain English

    If you remember the 200% R&D super-deduction, update that memory: it stepped down to 150% in 2017 and to a flat 100% from April 2020, and it has stayed at 100% under the new Income-tax Act. So there is no longer a multiplier, you deduct what you spend, no more. The real value today is timing and breadth: a full 100% write-off of eligible R&D, including capital expenditure (other than land and building), in the year, plus the separate PLI grant schemes for sectors like electronics, pharma and deep tech. For in-house R&D, the deduction under Section 35(2AB) needs your facility to be DSIR-approved, with the recognition and annual certification handled through Forms 3CK, 3CM and 3CL. Under the 22% concessional regime there is no extra R&D uplift either, R&D is simply deductible as a normal business expense.

    How it works

    Flat 100%, no multiplier

    All the Section 35 limbs now give a flat 100% deduction: contributions to approved research associations, universities, companies and national laboratories (35(1) and 35(2AA)), and in-house R&D (35(2AB)). The weighted deductions (175%, 200%, then 150%) were phased out, settling at 100% from 1 April 2020, and the position continues under the new Act. So the deduction equals the spend, with no uplift.

    In-house R&D under 35(2AB)

    The 35(2AB) deduction is for in-house R&D by a company engaged in biotechnology or in manufacturing (other than items in the Eleventh Schedule), at a facility approved by the Department of Scientific and Industrial Research (DSIR). It covers 100% of eligible revenue and capital expenditure, excluding land and building. The process runs through Form 3CK (application), Form 3CM (recognition) and Form 3CL (annual certification of eligible expenditure to the tax department), with a separate R&D cost-centre and timely renewal.

    Where the benefit really sits now

    With the multiplier gone, the R&D incentive today is about timing and certainty, a full upfront write-off of R&D capital that would otherwise depreciate, plus the policy shift towards Production Linked Incentive (PLI) grants for targeted sectors. Under the 22% concessional regime (115BAA), there is no enhanced R&D deduction, but R&D remains deductible as an ordinary business expense, and any business loss carries forward for the usual period.

    Who qualifies

    Interactions with other reliefs

    Section 115BAA

    No enhanced R&D deduction under the 22% regime; R&D is a normal deductible expense there

    PLI schemes

    The policy benefit has shifted from weighted deductions to PLI grants for targeted sectors

    Depreciation

    35(2AB) gives a 100% write-off of eligible R&D capital, in lieu of depreciating it

    Common mistakes + audit triggers

    Worked example

    BioNova Labs, Hyderabad - biotechnology company with a DSIR-approved R&D facility (2026-27)

    BioNova spends Rs 5 crore on in-house R&D (Rs 3 crore revenue, Rs 2 crore on equipment, no land or building) at its DSIR-approved facility.

    Calculation: Under Section 35(2AB) it deducts 100% of the eligible Rs 5 crore (revenue plus equipment, excluding any land or building), a full write-off in the year rather than depreciating the equipment. There is no longer a 150% or 200% multiplier, so the deduction equals the spend. It maintains the DSIR recognition (Form 3CM) and files the annual Form 3CL certification. If it were on the 22% regime, it would get no extra uplift, but the R&D would still be deductible as a normal business expense. It also checks PLI grant eligibility for its sector.

    Statute reference: Income-tax Act 2025 (R&D deduction, approx. Clause 45) (Income-tax Act 1961 s.35 / s.35(2AB)) s.35 limbs all 100% (weighting sunset 1 Apr 2020); s.35(2AB) in-house DSIR-approved; Forms 3CK/3CM/3CL. Source / notes: Year-of-Act note: flat 100%, no weighting; under 115BAA, R&D is deductible as normal expense without uplift.

    Frequently asked questions

    Is the 200% R&D super-deduction still available?+
    No. The weighted R&D deduction stepped down from 200% to 150% in 2017 and to a flat 100% from 1 April 2020, and it remains 100% under the new Act. So you deduct what you spend on eligible R&D, with no multiplier. The benefit now is timing (a full upfront write-off of R&D capital) and the separate PLI grant schemes, not an uplift.
    What does Section 35(2AB) cover?+
    In-house R&D by a company in biotechnology or in manufacturing (other than Eleventh Schedule items), at a DSIR-approved facility. It allows a 100% deduction of eligible revenue and capital expenditure, excluding land and building. The facility recognition and annual expenditure certification run through Forms 3CK, 3CM and 3CL, with a dedicated R&D cost-centre.
    Do I need DSIR approval for the R&D deduction?+
    For the in-house 35(2AB) deduction, yes, the facility must be approved by the Department of Scientific and Industrial Research, with recognition in Form 3CM and annual eligible-expenditure certification in Form 3CL. Without DSIR approval you cannot claim 35(2AB), though R&D may still be deductible as ordinary business expenditure under the general rules.
    Does R&D get an uplift under the 22% regime?+
    No. Under the concessional 22% regime (Section 115BAA), there is no enhanced or weighted R&D deduction. R&D expenditure remains deductible as a normal business expense, and any resulting business loss carries forward for the usual period, but there is no R&D multiplier, consistent with the flat 100% position that applies generally since April 2020.

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