Comparison of Section 45 "Expenditure on scientific research" between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

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..... It affects businesses undertaking scientific research, companies with in-house R&D, and payors to approved research entities. Effective dates or decision dates: Not stated in the document. Background & Scope Statutory hook: Clause 45, Income Tax Bill, 2025 (Old Version) - dealing with "Expenditure on scientific research" under profits and gains of business or profession. The clause aims to prescribe deductible expenditure for scientific research across capital and revenue heads, set deeming provisions for pre-commencement expenditure, permit deductions for in-house R&D for specified companies, and allow deductions for sums paid to approved research associations, universities, national laboratories, IITs and specified persons subject to ....

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....visions and are conditional on approval and compliance with prescribed documentation. * Deductions for sums paid to specified research associations, universities, national laboratories, IITs and approved companies provided the sums are directed to be used for programmes approved by the prescribed authority and subject to prescribed approvals and documentation. * Non-duplication rules: expenditure allowed under certain clauses cannot be claimed under other provisions; where an asset represents such expenditure and deduction is taken, section 33(3) deductions are barred for that asset. * Administrative provisions: Board referrals to Central Government or prescribed authority for questions on whether activities/assets constitute scientif....

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....ctible only where expressly directed to approved research programmes and the recipient/entity is approved and specified; compliance documentation and notification by Central Government are required. * Section 33(3) deductions barred for assets whose cost forms the basis of deductions under this clause. Illustrations * Example 1: A startup incurs expenditure on prototypes and pays salaries to R&D staff 18 months before formal commencement. If the prescribed authority certifies those salary/material costs as research-related, the expenditure is deemed incurred in the year of commencement and a deduction is allowable. (Details of certification procedure: Not stated in the document.) * Example 2: A biotechnology company constructs an....

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....e Act states in sub-section (1)(a) a deduction for "expenditure, being in the nature of-- (i) capital expenditure... or (ii) revenue expenditure" (without the explicit "(c) both"). * Practical impact: semantic; both texts allow capital and revenue deductions-no clear substantive divergence. * Pre-commencement expenditure rule placement and wording: The Bill places the deeming/provisions for pre-commencement salary/materials and capital expenditure in sub-section (2)(a) and (2)(b). The Act consolidates similar rules in sub-section (1)(b) and (1)(c). Wording differs: the Bill's sub-section (2)(a) ends sentence punctuation differently ("...expenditure shall be deemed...") whereas the Act states "such expenditure shall be deemed..." *....

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....lary), which could materially affect the ambit of deductible salary payments for pre-commencement and research employees; this is a substantive addition present in the Act but absent from the Bill as reproduced. * Prescribed authority references and finality: Both texts permit Board referrals and final decisions by Central Government or prescribed authority. The Act's sub-section (9) distinguishes referral for sub-section (3)(a) to Central Government and other activities to prescribed authority; the Bill's sub-section (9) uses similar wording but slightly shorter. * Practical impact: no clear substantive divergence. * Minor editorial differences: Differences in punctuation, ordering of clauses (for example, Act has explicit cl....