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.
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.
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.