Section 35CCD: Deduction for Expenditure on Skill Development Projects
Section 35CCD of the Income-tax Act, 1961 provides a deduction to a company for qualifying expenditure on a skill development project notified by the Central Board of Direct Taxes (CBDT), excluding the cost of land or buildings. The historical weighted deduction of 150% was reduced to 100% from assessment year 2021-22.
What is Section 35CCD?
Section 35CCD is a business-related tax deduction introduced to encourage corporate investment in approved skill development. Its key terms are:
- Company: The eligible claimant specified in subsection (1); this is not a general deduction for every individual, firm or trust.
- Skill development project: A project notified by the Board in accordance with prescribed guidelines, rather than any unapproved training activity.
- Board: The Central Board of Direct Taxes, as defined in the income-tax legislation.
- Expenditure: Qualifying project expenditure, expressly excluding expenditure in the nature of the cost of land or any building.
- Assessment year: The year in which income for the preceding previous year is assessed under the 1961 Act.
How much deduction is allowed?
| Assessment period under the 1961 Act | Deduction on eligible expenditure | Legal position |
|---|---|---|
| Earlier eligible assessment years, before AY 2021-22 | 150% | Historical weighted deduction under Section 35CCD(1), subject to eligibility. |
| AY 2021-22 onward, while governed by the 1961 Act | 100% | Proviso substitutes a deduction equal to eligible expenditure. |
| Periods governed by the Income-tax Act, 2025 | Verify under the new Act | Apply the provisions and notifications relevant to that tax year. |
Eligibility, approval and double-deduction restrictions
1. Eligible corporate expenditure
The company must incur expenditure on a skill development project notified by CBDT under prescribed guidelines. Merely conducting employee training does not by itself establish eligibility for this specific incentive.
2. Land and building excluded
Section 35CCD(1) explicitly excludes expenditure in the nature of the cost of any land or building. Such amounts cannot be included in the special deduction computation.
3. No double deduction
Under Section 35CCD(2), once a deduction is claimed and allowed for particular expenditure, the same expenditure cannot also be deducted under another provision of the Act for the same or another assessment year.
4. Evidence and compliance
Maintain project notification and approval records, expenditure invoices, payment evidence, training and implementation records, and other documentation required by the applicable rules. Eligibility depends on the relevant statutory provisions and prescribed guidelines.
Example: Deduction on an approved skill development project
Suppose an eligible company incurred Rs. 20,00,000 on a notified skill development project, excluding land and building costs. At the 100% rate applicable from AY 2021-22 under the 1961 Act, the Section 35CCD deduction would be Rs. 20,00,000, provided all legal conditions are met. The earlier 150% rate would have produced Rs. 30,00,000 for a qualifying expenditure of the same amount, but that historical rate must not be applied to later assessment years.
Section 35CCD: Original statutory text and amendment notes
The following preserves the substantive text and legislative notes from the original webpage. It is provided as a historical reference to the Income-tax Act, 1961, not as a substitute for the legislation governing a later tax year.
1(1) Where a company incurs any expenditure (not being expenditure in the nature of cost of any land or building) on any skill development project notified by the Board in this behalf in accordance with the guidelines as may be prescribed, then, there shall be allowed a deduction of a sum equal to one and one-half times of such expenditure.
2 Provided that for the assessment year beginning on or after the 1st day of April, 2021, the provisions of this sub-section shall have effect, as if for the words "an amount equal to one and one-half times of", the words "a sum equal to" had been substituted.
(2) Where a deduction under this section is claimed and allowed for any
assessment year in respect of any expenditure referred to in sub-section (1),
deduction shall not be allowed in respect of such expenditure under any other
provisions of this Act for the same or any other assessment year.
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1. Ins. by Act 23 of 2012, s. 10 (w.e.f. 1-4-2013).
2. Ins. by Act 28 of 2016, s. 20 (w.e.f. 1-4-2017)
Official legislation and tax resources
For the applicable text, notifications, rules and any transitional provisions, consult the Income Tax Department, the Income Tax e-Filing Portal, the India Code legislative database and the Gazette of India. Check the law applicable to the relevant assessment or tax year and the actual notification covering the project.
Frequently asked questions
Who can claim a deduction under Section 35CCD?
Under the 1961 Act provision, the claimant must be a company incurring qualifying expenditure on a notified skill development project, subject to prescribed conditions.
Is the Section 35CCD deduction still 150%?
No. The enhanced 150% deduction applied historically. From assessment year 2021-22, the statutory deduction was reduced to 100% of qualifying expenditure.
Can land and building costs be claimed?
No. Section 35CCD expressly excludes expenditure in the nature of the cost of any land or building.
Can the same expense be deducted under another section?
No. Section 35CCD(2) prohibits another deduction for the same expenditure once a deduction under this section has been claimed and allowed.
Editorial note: This page is general legal information and does not replace professional advice or the authoritative statutory text.