Treatment of research allowance
Q: A software engineer employee is given research allowance of Rs. 10,000 for a project over and above his salary. His expenditure on the same is nominal as he will be using largely the facilities available with the employer. Will the difference between the amount received and the expenses be taxable?
A: Rule 2BB(1)(e) grants deduction of ``any allowance granted for encouraging the academic research and training pursuits in educational and research institutions''. Hence a research grant for doing research in the employer's office, when it is granted in addition to salary, can only be treated as salary. If such research grant is for doing research in any recognised research institution elsewhere, the Rule would come to the help of the taxpayer.
If the research is for the benefit of the employer, it can be treated as exempt under Sec. 10(14) as any allowance for meeting expenses in the performance of duties of an office or employment, in which case, it will be subject to the proviso that it would be exempt only to the extent such expenses are actually incurred. It is not necessary that it should be incurred in the same year as it can be incurred even in later years.
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