The benefits/ incentives available for approved R & D Centres are:

  1. Direct Tax benefits

  • Super income tax deduction @ 150% of dedicated R&D expenditure both Opex & capex u/s 35 of income tax act as deduction from income
  • Opex viz. raw material used for making proto samples, R&D manpower salary, travel, utility bills, software AMC and other incidental expenses etc. of the R & D personnel are eligible for 150%
  • Capex viz. equipment for R&D centre are eligible for a one time weighted deduction (accelerated depreciation) of 150% of their cost price

Example of the tax saving:

Assumption

Turnover Rs. 10000.00 Lacs
R&D Expenses Rs. 50 Lacs (Capex) +50 Lacs (Opex)
Total company Expenditure Rs. 8000.00 Lacs including R&D

Calculations

Tax (@30% rate) in case of NO 35(2AB) DSIR Recognition and approval Rs. 600.00 Lacs
Tax (@30% rate) in case of “35(2AB) DSIR Recognition and Approval”: Rs. 557.25 Lacs
Total saving in tax: Rs. 42.75 Lacs for one year.
  1. Other Financial Benefits:
    • Excise duty exemption for product sold in India which have patent granted in two countries out of India, USA, Japan & any country in European Union for a period of 3 years after approval
    • Once you are an approved R & D Centre, you are eligible for Grants/soft loans from the Government on Project to Project basis
  2. Other advantages
    • Tenders have pre-qualification which includes DSIR recognition for R&D centres
    • Increases company’s credibility in case of International collaborations
  1. The applicant should be a company registered under the Companies Act, 1956 or 2013.
  2. The company shall be eligible for consideration only after the completion of three financial years after formation.
  3. The applicant should have regular source of income at least during the last two years to sustain the business and this needs to be elaborated in the application.
  4. The companies seeking recognition to their in-house R&D units should be engaged in manufacture or production or in rendering technical services.
  5. Companies fully engaged in contract research are also eligible for consideration provided independent infrastructure is available for research activities. Those engaged in research only at present but have plans to start manufacture at a later date may also be considered for the recognition, if there is a potential.
  6. The R&D unit(s) should not be located in residential areas but should be operating in premises authorized by the relevant Central/State Government. (Proof for such authorization needs to be furnished).
  7. Independent infrastructure for research activities and adequate technically qualified manpower should be available (Minimum area for the R&D activities should be at least 1000 Sq. ft.).
  8. At the time of application, the R&D unit(s) should be functional and should have well defined, time-bound R&D programmes leading to development of innovative products and/or technology(ies).

The In-house R&D units applying for recognition to DSIR are expected to be engaged in innovative research & development activities related to the line of business of the firm, such as, development of

  1. New technologies which may be present at the market but new to the company. Example:
    • - For Pharma Companies: New molecules/product development on basis of new technology
    • - For Engineering Companies: New component development on new technology
  • Other sectors: New products development
  1. Design & engineering,
  2. Process/product/design improvements,
  3. Developing new methods of analysis & testing;
  4. Research for increased efficiency in use of resources, such as, capital equipment, materials & energy;
  5. Pollution control, effluent treatment & recycling of waste products or any other areas of research

Examples:

R&D activities in Shoe industry which can fall under Research definition for DSIR In house R&D recognition:

  1. Conceptualization:
    1. On the basis of market/ client  research/requirement conceptualization of the new shoes design
    2. Selection of the BOM for the concept which company is looking for.
    3. Validation of the concept on the basis of the study and checking the feasibility of new product in the market.
  2. Drawing & Designing of the shoes as per the requirement of the project
    1. Designing of baby product
    2. Sketch drawing on software or manual
    3. Fabric selection activities
    4. Making of sew samples
    5. Designing of the pattern for the shoes
    6. Finalization of design of the shoes
  3. Basic simulation of the design prepared on software
    1. Durability test
    2. Fabric test
    3. Sticking test
  4. Proto Development/ sample preparation:
    1. Cutting of the Fabric
    2. Machining
    3. Stitching
    4. Development of minimum numbers of samples for testing
  5. Sample validation/ testing
    1. Physical testing of the shoe samples

It may be noted that market research, work & methods study, operations & management research, testing & analysis of routine nature for operation, process control, quality control and maintenance of day to day production, maintenance of plant are not considered as R&D activities.