Section 10(21) of the Income Tax Act deals with Exemption for Income of Research Organisation. Under Income Tax Act Section 10(21), Any Income of the Research Organisation specified in the Act is not taxable and is totally exempt from the tax. The purpose of incorporating this section into the Income Tax Act is to promote innovation in India. Section 10(21) of the Income Tax Act has definitely achieved this purpose.
Scope of Section 10(21) Income Tax Act
Any income of a Research Association, approved for the purposes of Section 35(1)(ii)(iii) shall be exempt from tax if the Research Association applies its income or accumulates it for application, wholly and exclusively, to the objects for which it is established and the provisions of Section 11(2) and (3) shall be applicable to such accumulations with due adaptations for the purposes of scientific research or research in social science or statistical research and it does not invest or deposit its funds.
Section 10(21) Income Tax Act Exemption is not applicable on
- Any assets held by the research association where such assets form part of the corpus of the fund of the association as on the first day of June, 1973;
- any assets (being debentures issued by or on behalf of, any company or corporation) acquired by the research association before the 1st day of March, 1983;
- any accretion to the shares forming part of the corpus of the fund mentioned in sub-clause (i) by way of bonus shares allotted to the research association;
- voluntary contribution received and maintained in the form of jewellery, furniture or any other article as the Board may by notification in the official gazette, specify
for any period during the previous year otherwise than in the forms and modes as specified in Section 11(5).
However, the exemption under this clause shall not be denied in relation to voluntary contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred to (i), (ii), (iii) and (iv) above, subject to condition that such voluntary contribution is held by the research association only in the forms or modes as specified in Section 11(5) after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1992 whichever is later.
Further, the exemption under section 10(21) to any profits and gains of business carried on by the research association shall be available if the business is incidental to the attainment of its objectives and separate books of account are maintained in respect of such business.
Also, the exemption under this clause shall be withdrawn if the Central Government is satisfied that the conditions are not being fulfilled but an opportunity of being heard shall be provided.