Purpose:
This section provides a full tax exemption on income earned by scientific research associations that are approved by the government. The goal is to promote scientific research in India.
Key Conditions for Exemption:
✅ Must be an approved scientific research association (recognized by the Department of Science & Technology (DST) or Prescribed Authority).
✅ Income must be applied solely for research purposes (not for personal profit).
✅ Exemption covers:
- Grants/donations received
- Income from research projects
- Interest/dividends from investments (if used for research)
✅ Must file annual returns to maintain approval.
Example 1: Research Grant Received by an Approved Association
- Organization:“Indian Institute of Chemical Research” (approved by DST).
- Income Sources:
- Government Research Grant: ₹5 Crores
- Donations from Corporates: ₹2 Crores
- Total Income:₹7 Crores
- Taxable Income:₹0 (Fully exempt under Section 10(21))
- Condition:Funds must be used only for scientific research.
Example 2: Interest Earned on Research Funds
- Organization:“National Environmental Research Foundation” (approved).
- Income Sources:
- Bank Interest on Research Corpus Fund: ₹10 Lakhs
- Research Consulting Fees: ₹50 Lakhs
- Exempt Income (Interest & Fees used for research):₹60 Lakhs
- Taxable Income:₹0 (If fully utilized for research activities)
Example 3: Commercial Activity (Not Exempt)
- Organization:“Advanced Tech Research Society” (approved).
- Income Sources:
- Research Grants: ₹3 Crores (Exempt)
- Profit from a Commercial Lab Testing Service:₹1 Crore
- Exempt Income (Grants):₹3 Crores
- Taxable Income (Business Profit):₹1 Crore (Taxable under “Profits & Gains from Business”)
