India

R&D Weighted Deduction

Description of Incentive

Under Section 35(2AB) of the Income Tax Act 1961, a weighted deduction in income tax of 150% is available for R&D expenditure for approved in-house R&D centres. This will be reduced to 100% from March 2020 (i.e. the 2020-2021 Financial Year).

The deduction is administered by the Department of Scientific and Industrial Research (DSIR).

Benefits for companies with in-house R&D centres include:

• Weighted tax deduction of 150%
• Write off of revenue expenditure on R&D
• Write off of capital expenditure on R&D in the year that expenditure was incurred
• Duty free imports of analytical and specialty equipment
• Duty exemption for 3 years on goods developed by a wholly owned Indian firm and patented in any two countries out of India, the US, a country in the European Union or Japan.

Eligibility Criteria

In-house R&D centres must apply to the DSIR for approval to be eligible for the weighted tax deduction.

Criteria includes the following:

• The R&D infrastructure must be identifiable and exclusive R&D staff headed by a full-time R&D director with direct access to the CEO or Board of Directors.
• The building must not be used only for routine activities including routine data collection and testing, market research, quality control or similar.
• A separate account must be kept for each approved facility to be audited annually.

Services

Swanson Reed offers the following services:

• Advice on tax preparation relevant to claiming the R&D tax credits incentive
• Preparation of documents relating to filing and substantiating a R&D taxation claim
• R&D tax advice and consultations
• R&D tax claim planning and preparation

For a full range of services in relation to the credit, please click here.