The unexpected announcement of reduced corporate tax rate for prevailing companies to 22% plus surcharge U/S 115 BAA has been a major blow to scientific research in this India by affecting all major manufacturing companies, IITs, Government funded research laboratories, deemed universities and private funded tech institutes.
The consequence of the reduced corporate tax rate with regards to the scientific research is as follows:-
a. Under Section 35 (2AB): Companies cannot claim weighted tax deduction at 150% for Capex and Opex for scientific research being done in DSIR permitted research laboratories but will be able to claim only 100% deduction on Opex u/s 35 (1)(i) and Capex u/s 35(1)(iv) besides 35(1)(2ia)
b. Under Section 35 (2AA): Tax deduction of 200% provided for research subsidy to IITs, Government funded Research Labs and Indian Universities.
c. Under Section 35 (ii): Tax deduction of 175% for doing scientific research at research facilities, universities and college.
d. Under Section 35 (iia): Tax deduction of 125% for doing scientific research with all manufacturing companies.
e. Under Section 35 (1)(iii): Tax deduction of 125% for societal or statistical research with research associations, universities and colleges
This will lead to massive pressure on research labs, IITs and institutions which are involved in scientific research to raise capital for research whereby CSR funds can be made available for research to entitled incubators, research labs and colleges by companies as per the latest modification.
This is the time to be inventive and invent ways to raise funds for research with main focus on technology commercialization and business partnerships given the policy restrictions.
The message is loud and very clear, it’s time to wake up and invent ways to sustaining your R&D!