Section 135 Deduction in respect of certain donations for scientific research or rural development.

Income-tax Act, 2025

At a Glance

Clause 135 of the Income Tax Bill, 2025 (Old Version). It proposes a deduction for certain donations made for scientific research or research in social sciences/statistics to approved research associations or educational institutions. It matters to donors (individuals and entities) considering donations to such bodies and to tax administration when verifying claims. Effective date or decision date: Not stated in the document.

Background & Scope

Statutory hook: Clause 135 of the Income Tax Bill, 2025 (Old Version) sets out a deduction in computing total income for amounts paid in the tax year to certain research associations, universities, colleges or other institutions approved u/s 45(3)(a)(i) or 45(3)(a)(ii) for use in scientific research or research in social science/statistics. The clause is placed under "Deductions in respect of certain payments." Definitions: Not stated in the document beyond the references to "research association", "University, college or other institution" and cross-reference to section 45(3)(a)(i)/(ii). No further definitional text or explanatory definitions are included in the clause itself.

Statutory Provision Mode

Text & Scope

Coverage: Clause 135(1) permits deduction in computing total income for sums paid in the tax year by an assessee to-(a) a research association with object of undertaking scientific research, or to a University/ college/ other institution approved for purposes of section 45(3)(a)(i) to be used for scientific research; and (b) a research association with object of research in social science or statistical research, or to a University/ college/ other institution approved for purposes of section 45(3)(a)(ii) to be used for such research. Clause 135(2) denies the deduction where (a) the assessee's gross total income includes income chargeable under "Profits and gains of business or profession"; or (b) the contribution is made in cash exceeding two thousand rupees. Clause 135(3) states that deduction shall not be denied merely because approval to the recipient institution has later been withdrawn. Clause 135(4) provides that the claim shall be allowed on the basis of information furnished by the payee to the prescribed income-tax authority or person authorised by such authority, subject to verification as per the Board's risk management strategy.

Interpretation

Legislative intent: The text indicates a legislative intent to incentivise donations for scientific and social-science/statistical research by providing a tax deduction subject to prescribed eligibility and evidentiary requirements. The denial of the deduction where the donor has business/profession income suggests a policy decision to exclude commercial donors from this benefit, potentially to avoid conflation with business expenditure. The cash payment threshold reflects a preventative measure against untraceable cash donations. The verification provision places reliance on information supplied by the recipient institution and internal risk-based checks by the tax Board. The clause does not expressly state the quantum or ceiling of deduction; Not stated in the document.

Exceptions/Provisos

Carve-outs: Clause 135(2) contains two explicit exceptions baring deduction where (a) donor's gross total income includes business/profession income; or (b) contribution in cash exceeds Rs 2,000. Clause 135(3) functions as a proviso protecting donors from retrospective denial of deduction solely because the recipient's approval was later withdrawn.

Illustrations

• Example 1: An individual (not carrying on business or profession) makes an electronic donation of Rs 10,000 in the tax year to an approved university for scientific research. Under Clause 135(1), this sum is deductible (subject to verification by the recipient and Board's risk checks). (This is a hypothetical consistent with the text.)
• Example 2: A firm with income under "Profits and gains of business or profession" pays Rs 5,000 to a research association. Clause 135(2)(a) would preclude deduction. (Hypothetical consistent with the text.)
• Example 3: A donor pays Rs 3,000 in cash to an approved college; because cash contribution exceeds Rs 2,000, Clause 135(2)(b) disallows the deduction. (Hypothetical consistent with the text.)

Interplay

Interaction with other provisions: The clause refers to section 45(3)(a)(i) and (ii) for approval of recipient institutions; further details about approval criteria or procedure are Not stated in the document. Clause 135(4) contemplates information furnished by the payee to the prescribed income-tax authority-procedural rules, forms or timelines for such filing are Not stated in the document. The Bill text does not include an express anti-double-claim provision present in the enacted Section 135 (Not stated in the document for the Bill), nor does it specify whether the deduction is subject to any overall ceiling or percentage limit (Not stated in the document).

Differences between the two provisions and practical impact

• Presence of an additional subsection: The enacted Section 135 (Document 1) contains a subsection (5) which is absent from Clause 135 in the Bill (Document 2). Subsection (5) in the enacted text provides: "Where a deduction for any tax year has been claimed and allowed in respect of any payment of the nature referred to in this section, no deduction in respect of such payment shall be allowed under any other provision of this Act in any tax year."
  • Practical impact: This is a substantive anti-avoidance/anti-double-claim clause preventing taxpayers from claiming the same payment under any other deduction provision of the Act. Its absence in the Bill meant potential uncertainty or opportunity for double claims; its inclusion in the Act closes that gap and reduces risk of duplicate deductions and related disputes.
• Minor drafting and reference differences: The Bill (Document 2) uses the phrasing "to a University, college or other institution approved for the purposes of section 45(3)(a)(i) to be used for scientific research" and mirrors similar phrasing for social science/statistical research. The Act (Document 1) reads essentially the same but with slightly different punctuation and the phrase "approved for the purposes of section 45(3)(a)(i) to be used for scientific research" without the additional "to" placements present in the Bill; subsection numbering references differ slightly in cross-references (Bill: "sub-section (1)(a) and (1)(b)"; Act: "sub-section (1)(a) and (b)").
  • Practical impact: These drafting variations are stylistic and do not appear to change substantive coverage or eligibility. They have negligible practical effect.
• Withdrawal of approval wording: Slight variation in wording about withdrawal of approval. The Bill states: "...referred there in to whom the payment was made has been withdrawn." The Act states: "...referred therein has been withdrawn."
  • Practical impact: Minor grammatical difference-does not change the core rule that deduction shall not be denied merely because approval to the recipient was later withdrawn.

Practical Implications

• Compliance and risk areas: Donors must ensure that recipient institutions are approved under the referenced section, that donations are not in cash exceeding Rs 2,000, and that the donor's gross total income does not include business/profession income if intending to claim deduction. The verification mechanism under Clause 135(4) places significance on the accuracy and timely furnishing of information by recipients to the tax authority; donors may face disallowance if the recipient fails to furnish required information or if verification raises queries. The Bill does not set out documentation standards, prescribed forms or timelines-Not stated in the document.
• Record-keeping/evidence points: Donors should retain receipts and evidence of payment (bank records, electronic payment confirmations) and confirmation that the recipient institution was approved u/s 45(3)(a)(i)/(ii) at the time of payment. Evidence showing that payments were not in cash (for amounts above Rs 2,000) will be material. The Bill does not specify the form or content of payee information to be furnished-Not stated in the document.

Key Takeaways

• Clause 135 proposes a specific deduction for donations to approved research associations and educational institutions for scientific and social-science/statistical research.
• Deduction is disallowed where the donor has income under "Profits and gains of business or profession" or where cash donations exceed Rs 2,000.
• Deduction cannot be denied solely because recipient's approval is later withdrawn.
• Claimed deductions are to be allowed based on information furnished by the payee to the prescribed income-tax authority and subject to the Board's risk-based verification.
• The Bill does not include an explicit prohibition on claiming the same payment under other provisions (this was introduced in the enacted Section but is Not stated in the Bill).
• Procedural details (forms, timelines, approval criteria, ceilings or percentage limits) are Not stated in the document.
• Donors should maintain contemporaneous, non-cash proof of payment and confirmation of recipient approval to avoid disallowance under the clause's conditions.

Full Text:

Section 135 Deduction in respect of certain donations for scientific research or rural development.