IN-HOUSE RESEARCH AND DEVELOPEMENT UNIT IN COMPANY

PROCEDURE FOR AVAILIING BENEFIT OF R&D EXPENDITURE

STAGE- I Application to DSIR

The company has to make an application to Department of Scientific and Industrial Research for grant of recognition and registration to its in-house R&D units.

Following Criteria will be adopted by DSIR for Recognition of R&D unit

1.The Company must spell out a long term R&D policy which should be displayed prominently in the inhouse R&D unit.

2. R&D activities should be separate from routine activities of the firm, such as, production and quality control.

3. The units should have qualified staff exclusively engaged in R&D and should be headed by a full-time qualified & experienced R&D person

The following activities shall be not treated as R&D:-

Market Research.

Operation & Management research.

Testing & analysis of routine nature of operation .

Process control

Quality control and maintenance of day to day production.

Work and methods study.

Table of Contents:- 

Executive summary

Stage I:- Application to DSIR.

Stage II:- Application to Income tax department.

Other Benefits.

Executive summary.

Company has to apply to DSIR for grant of recognition and registration of in-house R&D facility.

Once a company is granted recognition by DSIR, it has to apply to Income Tax authorities for approval to get deduction u/s 35 (1) of Income tax Act, 1961.

Excise duty exemption with certain conditions.

Financial support by government.

STAGE II: Approval form Income Tax authorities

1. Only companies having in-house R&D centre(s) recognised by DSIRare eligible to make application for approval under section 35 (2AB)of the Income Tax Act.

2 . Procedure and guidelines for approval under section 35 (2AB) of the income tax act are available on DSIR websitehttp://www.dsir.gov.in/forms/irdpp/352ab_guide.pdf andhttp://www.dsir.gov.in/forms/irdpp/352ab_guide.rtf.

Benefits under Income Tax Act.

The following Expenditure incurred for in-house research shall be allowed as deduction: -

Revenue Expenditure Sec 35(1)(i): 100% of the current year Revenue Expenditure is allowed as deduction.

Capital Expenditure Sec 35(1)(iv) : 100% of Capital Expenditure other than land is allowed as deduction.

Note :-

Depreciation cannot be claimed on the capital Expenditure which was allowed as deduction u/s 35(1)(iv).

Weighted deduction @ 200% is not available in respect of expenditure incurred after 31-3-2012.