The asset label does not establish the research deduction
Section 45(1)(a) of the Income-tax Act, 2025 covers capital and revenue expenditure on scientific research related to the assessee's business, subject to the section. Capital expenditure on acquiring land, including land acquired as part of property, is excluded; subsection (11)(d) includes an interest in land. This guide, checked on 28 October 2026, addresses an eligible company's current tax-year 2026–27 capital-cost working. It does not apply the new section number to FY 2025–26 / AY 2026–27 returns. Check the selected corporate regime's deduction restrictions before using the examples. Income-tax Act, 2025 as amended by Finance Act 2026: section 45(1), (6), (7), (9) and (11)(d).
Prove the business and research connection
Build a project file linking the research objective, technical work, business activities and asset use. A laboratory label on a purchase order does not automatically make a routine production asset eligible. Shared-use and disputed-purpose assets require a supported conclusion on whether and to what extent the statutory condition is met. Subsection (9) provides the specified referral mechanism where the research character or asset use is questioned; an internal management label is not a substitute for that statutory process. Income-tax Act, 2025 as amended by Finance Act 2026: section 45(1), (6), (7), (9) and (11)(d).
Split land from a composite property acquisition
A single property invoice can include land, buildings, equipment and other costs. Obtain a defensible allocation rather than deducting the full consideration because the premises house research. The land exclusion applies even where land is purchased as part of property. A land-interest acquisition must also be screened. Do not assume that every amount removed from this deduction is immediately deductible elsewhere: its separate capital and tax treatment needs its own analysis. Income-tax Act, 2025 as amended by Finance Act 2026: section 45(1), (6), (7), (9) and (11)(d).
Do not conflate the section's alternative routes
Subsection (2) has its own approved in-house R&D facility population and excludes the stated land or building cost. Subsection (3) addresses specified payments to external research entities or programmes. This article's models deliberately isolate current expenditure under subsection (1), with eligibility already established; they do not import a historic weighted deduction or assume that an approval condition from another route applies identically. Pre-commencement expenditure under subsection (1)(b) and (c) has a separate three-year and, for the stated revenue population, certification analysis. Those transition-sensitive amounts are not included in the numerical models. Income-tax Act, 2025 as amended by Finance Act 2026: section 45(1), (6), (7), (9) and (11)(d).
Reconcile the capital deduction and the tax asset register
Subsection (6) prevents the covered section 33(3) depreciation deduction on an asset representing expenditure allowed under this section, for the same or another tax year. Keep the research-deduction history attached to the asset, including when it moves between departments. A book depreciation charge can still need a tax add-back; a current tax depreciation schedule should not silently add a second allowance because the book asset remains visible. Subsection (7) applies the stated unabsorbed-depreciation mechanism to capital deductions under subsection (1), which requires a separate loss and absorption working where relevant. Income-tax Act, 2025 as amended by Finance Act 2026: section 45(1), (6), (7), (9) and (11)(d).
Close the book-to-tax bridge before filing
Record the qualifying expenditure, excluded land, actual book charge or capitalisation, current research deduction, any book-depreciation add-back and the resulting tax difference. The examples assume the whole stated qualifying amount is otherwise available and do not decide a company's loss set-off, tax rate or later asset disposal. Subsequent sales and reorganisations need their own provisions and evidence; neither the original deduction nor a zero tax allowance in a later year by itself determines accounting derecognition or disposal income. Income-tax Act, 2025 as amended by Finance Act 2026: section 45(1), (6), (7), (9) and (11)(d).
Applicable primary references
Income-tax Act, 2025 as amended by Finance Act 2026: section 45(1), (6), (7), (9) and (11)(d)
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Remove land from the acquisition
Assume composite cost ₹30,00,000 is defensibly allocated to land ₹10,00,000, a qualifying research building ₹12,00,000 and qualifying research equipment ₹8,00,000 under subsection (1). The model research-capital pool is ₹20,00,000, not ₹30,00,000. All non-land eligibility is stipulated.
Illustrative example 2: Exclude a land interest as well
Assume eligible equipment ₹8,00,000 and a separately identified ₹2,00,000 acquisition of an interest in land. The land-interest amount is excluded from this model, leaving ₹8,00,000, subject to the remaining conditions.
Illustrative example 3: Capitalisation creates a tax deduction bridge
Assume profit before relevant adjustments ₹50,00,000 and a capitalised, fully qualifying current research asset cost ₹10,00,000 with no book depreciation charged yet. The isolated research deduction gives ₹40,00,000 before all other tax adjustments.
Illustrative example 4: Book depreciation and research deduction are different entries
Assume draft profit ₹48,00,000 already deducts ₹2,00,000 book depreciation on an otherwise qualifying ₹10,00,000 research asset, and that book charge is not tax-allowable separately. Add back ₹2,00,000 and deduct ₹10,00,000: the model result is ₹40,00,000, rather than deducting both allowances from ₹50,00,000.
Illustrative example 5: Prevent a second asset allowance
Assume research expenditure represented by an asset was already allowed at ₹10,00,000. A later draft tax schedule proposes another ₹1,50,000 depreciation under section 33(3) on that same covered asset. Removing that prohibited duplicate reduces the draft additional allowance from ₹1,50,000 to zero; book depreciation remains a separate accounting matter.
Illustrative example 6: Keep the eligible population traceable
Assume invoices total ₹15,00,000, comprising a legally established qualifying research-asset population ₹9,00,000, excluded land ₹4,00,000 and unrelated office equipment ₹2,00,000. This research-capital pool is ₹9,00,000. The remaining ₹6,00,000 needs separate tax classification rather than automatic write-off or inclusion here.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Establish period and regime | Tax-year law and deduction restrictions |
| 2 | Define the research project | Technical activity and business connection |
| 3 | Identify the correct statutory route | Subsection (1) versus approved facility or external-payment provisions |
| 4 | Reconcile invoices and asset use | Cost, ownership and supported research purpose |
| 5 | Separate composite property components | Land, buildings, equipment and allocation evidence |
| 6 | Screen land interests | Subsection (11)(d) and acquisition terms |
| 7 | Isolate pre-commencement amounts | Separate timing, certification and transition review |
| 8 | Reconcile actual accounting entries | Capitalisation, book expense and depreciation |
| 9 | Prevent duplicate tax depreciation | Prior deduction history and section 45(6) |
| 10 | Close the computation and future trail | Current claim, absorption questions and asset-event register |
Sixteen practitioner FAQs
1. Which tax period is addressed?
Current tax year 2026–27 under the 2025 Act.
2. Does this guide relabel AY 2026–27 return sections?
No. That earlier return needs its applicable earlier law.
3. Must research relate to the business?
Yes. Establish the section's business connection.
4. Is a laboratory purchase label enough?
No. Support the activity and actual asset use.
5. Is land included if bought within a composite property?
The subsection (1) capital exclusion expressly covers that case.
6. Can an interest in land escape that screen?
Subsection (11)(d) includes an interest in land.
7. Do these models use the approved in-house facility route?
No. They isolate otherwise qualifying subsection (1) current costs.
8. Can the subsection (2) land-and-building exclusion be copied without distinguishing routes?
No. Identify the actual provision before applying its conditions.
9. Do the examples claim a historic weighted percentage?
No. They use the stipulated qualifying expenditure amount.
10. Are external research payments the same cost population?
No. Subsection (3) has its own requirements.
11. Are pre-commencement costs automatically included?
No. Their separate timing, certification and transition analysis is required.
12. Can an internal dispute about research status simply be ignored?
Subsection (9)'s referral framework must be considered on the actual facts.
13. Can book depreciation still exist after a tax research deduction?
Accounting and tax allowance are different workings.
14. Can covered section 33(3) depreciation be claimed again?
Subsection (6) prevents that covered duplication.
15. Does an excluded amount automatically become another current deduction?
No. Determine its separate treatment.
16. What must remain with the asset register?
Qualifying cost, research deduction allowed, excluded amounts and later event evidence.
Conclusion
Identify business-related scientific-research capital expenditure, remove land and land interests, and reconcile the deduction without claiming depreciation again on the same asset.