Chartered Accountant · ICAI M.No. 153926 · FRN 136869W · Reviewed on 9 October 2026
What section 35D actually covers
The list is specific: feasibility and project reports, market surveys, engineering services, legal charges for drafting agreements and the company’s constitutional documents, incorporation fees, and share-issue expenses for the initial capital. Spend ₹5 lakh on eligible heads and the deduction is ₹1 lakh a year for five years — subject to the 5% cap. Expenses outside the list (pre-launch salaries, rent, marketing) need the harder argument that business had already been “set up” when they were incurred.
Founder-paid bills: route them properly
Costs paid personally before the company existed are brought in by a board resolution ratifying pre-incorporation contracts and reimbursing the founder — with the original invoices, ideally re-issued in the company’s name where vendors agree. Clean routing decides both the 35D claim and the GST position; informal “the company owes me” ledgers decide neither.
The GST edge cases
Input tax on goods held in stock on the day before registration can be claimed within the section 18(1) window (Form ITC-01, 30 days). Services consumed before registration — professional fees, software, rent — carry no such route; their GST becomes cost. Moral: register early when a spend-heavy setup phase is coming. Our startup tax practice sets the sequence before the first invoice arrives.