Schedule ESR – Expenditure on scientific Research etc. (Deduction under section 35 or 35CCC or 35CCD) AY 2026-27
Schedule ESR in the Income Tax Return forms deals with expenditure on Scientific Research and related deductions under sections 35, 35CCC, and 35CCD of the Income Tax Act.
In this schedule, taxpayers must disclose details of various scientific research expenses for which deductions are claimed. It captures:
• The section under which the expenditure is covered (like sections 35(1)(i), 35(1)(ii), 35(2AA), 35CCC, 35CCD, etc.).
• The amount debited to the profit and loss account, if any, for such expenditure.
• The deduction allowable under the Act may differ from the amount debited in the books (due to weighted or additional deductions).
• The excess amount, i.e., the deduction allowed over and above the amount debited in the books, which is computed automatically.
The schedule also includes a note requiring taxpayers to furnish additional details in Schedule RA if deductions are claimed under specified sub-sections.
Section 35, Section 35CCC and Section 35CCD of Income-tax Act, 1961
Rule Rule 18AB, Rule 5CA , Rule 5F and Rule 6 of the Income-tax Rules, 1962
Deduction under Section 35 is available for expenditure incurred either on in-house scientific research or by way of payments made to outside agencies. In the case of in-house research and development, both revenue and capital expenditure are deductible, provided the research is related to the assessee’s business. Deduction is also allowed in certain cases where donations are made to external institutions for scientific research, whether or not such research is related to the assessee’s business.
Deduction under Section 35CCC is allowed when an assessee incurs expenditure on a notified agricultural extension project. Deduction is restricted to 100% of the actual expenditure.
Deduction under Section 35CCD is available to a company incurring expenditure on a notified skill development project, and the deduction is equal to 100% of the actual expenditure incurred.
This schedule applies to ITR-3, ITR-5 and ITR-6.