Contributors to the Trust may claim tax deductions for five years, starting from the financial year 2021-’22 as the central board granted the status of “Research Association” under Section 35(1)(ii) of the Income tax Act on Monday.
Section 35 of the Income tax Act allows deduction of any expenditure of an amount equal to “one-and-one-half times of any sum paid to a research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research”. A taxpayer would therefore be allowed to avail the deduction under the income tax rules, computing it under the head business and profession.
Rule 5D of section 35 of the Act listed the conditions for the approval of the deductions. Under the rule, the primary aim to avail of the tax exemptions would be to carry out scientific research or in social science or statistics, reported The Hindu.
This research should be done by the association that will need to maintain accounts and get them audited by an accountant as mandated under the law and then submit the relevant documents to the Income Tax Department. The association would have to keep a separate statement of donations that were received and the amount used for research activities.
Patanjali Research Foundation Trust’s website said it has made significant investments to create a world class research institute that is supported with advanced scientific technology and a team of experts, according to The Hindu. The institute was inaugurated by Prime Minister Narendra Modi on May 3, 2017.
Nangia Andersen LLP Director Neha Malhotra told PTI that India understands that economic growth could be achieved through investments in research and development. She added that therefore the government wants to increase participation of the private sector to fuel spending in research and development.
“Tax breaks in the form of deduction of expenses incurred for specified purposes, channelises the funds of the taxpayers in the desired area of investment, that is scientific research in this case,” Malhotra said, according to PTI. “Such provisions serve as tax incentive for the taxpayer spending on scientific research and source of funds for the research association.”