Introduction to Section 35 Approval
Section 35 of the Income Tax Act, 1961 provides tax incentives to donors who contribute to approved scientific research institutions and universities. Obtaining Section 35(1)(ii) or Section 35(1)(iii) approval enables institutions to attract donations by offering 100% tax deduction benefits to donors.
This Saving Mantra guide explains the complete step-by-step process for obtaining Section 35 approval in India, designed for trusts, societies, Section 8 companies, and research institutions.
What is Section 35(1)(ii) Approval?
Section 35(1)(ii) approval is granted to:
- Scientific research associations
- Institutions engaged in scientific research (excluding social science)
Donor Benefit:
100% deduction of donation amount from taxable income.
What is Section 35(1)(iii) Approval?
Section 35(1)(iii) approval applies to:
- Universities
- Colleges
- Institutions conducting research in social sciences or statistical research
Donor Benefit:
100% deduction of donation amount from taxable income.
Key Difference: 35(1)(ii) vs 35(1)(iii)
| Particulars | Section 35(1)(ii) | Section 35(1)(iii) |
|---|---|---|
| Nature of Research | Scientific (Non-social) | Social Science / Statistical |
| Eligible Entities | Research Associations | Universities / Colleges |
| Approving Authority | Central Board of Direct Taxes | Central Board of Direct Taxes |
| Donor Deduction | 100% | 100% |
Eligibility Criteria for Section 35 Approval
To qualify, the applicant institution must:
- Be registered as Trust, Society, or Section 8 Company
- Be engaged in genuine research activities
- Maintain proper books of accounts
- Have non-profit objectives
- Not distribute profits or dividends
- Be compliant with income tax regulations
Step-by-Step Process for Section 35(1)(ii) & 35(1)(iii) Approval
Step 1: Legal Registration of Institution
Ensure your organization is legally registered under:
- Indian Trusts Act
- Societies Registration Act
- Companies Act, 2013 (Section 8)
Step 2: Obtain Income Tax Registration
Mandatory registrations include:
- PAN of the institution
- Registration under Section 12AB
- Valid 80G registration (recommended)
Step 3: Prepare Research Infrastructure
The institution must demonstrate:
- Dedicated research facilities
- Qualified researchers and staff
- Ongoing or completed research projects
- Published research papers (if available)
Step 4: Documentation Preparation
Prepare the following documents:
- Registration certificate and governing documents
- PAN and 12AB certificate
- Audited financials (last 3 years)
- Activity and research reports
- List of donors (if any)
- Details of governing body members
- Affidavit for non-commercial use of funds
Step 5: Online Application Filing
- File application electronically with the Income Tax Department
- Select applicable section: 35(1)(ii) or 35(1)(iii)
- Upload documents and declarations
- Submit application digitally
Step 6: Scrutiny & Inspection
- Authorities may seek clarification or additional documents
- Physical inspection of premises may be conducted
- Evaluation of research authenticity and infrastructure
Step 7: Grant of Approval
Upon satisfaction:
- Approval notification issued
- Institution listed on Income Tax approved institutions list
- Donors become eligible for deduction benefits
Time Required for Section 35 Approval
- Average processing time: 3 to 6 months
- May extend depending on scrutiny and verification
Post-Approval Compliance Requirements
After receiving approval, the institution must:
- Utilize donations strictly for research purposes
- Maintain separate books of accounts
- File annual returns and audit reports
- Submit research progress reports as required
- Avoid diversion of funds for non-research activities
Non-compliance can lead to withdrawal of Section 35 approval.
Common Reasons for Rejection
- Inadequate research activity evidence
- Poor financial documentation
- Commercial or profit-oriented objectives
- Non-compliance with tax provisions
- Inactive or paper-based institutions
How Saving Mantra Supports You
Saving Mantra offers complete Section 35 approval services, including:
- Eligibility assessment
- Research documentation structuring
- Application filing & follow-ups
- Liaison with tax authorities
- Ongoing compliance advisory
Disclaimer
This content is for informational purposes only and does not constitute legal, tax, or professional advice. Provisions under the Income Tax Act are subject to change. Readers are advised to consult qualified professionals before applying. Saving Mantra shall not be liable for actions taken based on this information.