Implication of new corporate tax cut on scientific research

The sudden introduction of reduced corporate tax rate for existing companies to 22% plus surcharge under section 115 BAA has dealt a severe blow to scientific research in this country not only affecting companies but IITs, Government research labs, deemed universities and private technology institutes as well.

The implication for companies availing reduced corporate tax rate wrt scientific research is as follows:-

a. Section 35 (2AB): Will not be able to claim weighted tax deduction at 150% for capital and operating expenditure for scientific research carried out in DSIR approved research laboratories but will be able to claim 100% deduction on operating expenditure u/s 35 (1)(i) and capital expenditure u/s 35(1)(iv) along with 35(1)(2ia)

b. Section 35 (2AA): Tax deduction of 200% provided for research funding to Indian Institute of Technology, Government Research Labs and Universities

c. Section 35 (ii): Tax deduction of 175% for carrying out scientific research at research association, universities and college

d. Section 35 (iia): Tax deduction of 125% for carrying out scientific research with companies

e. Section 35 (1)(iii):Tax deduction of 125% for carrying out social or statistical research with research association, universities or colleges 

This will put immense pressure on research labs, IITs and colleges involved in scientific research to raise funds for research with a silver lining whereby CSR funds can be provided for research to eligible incubators, research labs and colleges by companies as per the latest amendment.
So it is time to get inventive and find ways to fund raise for research as also focus on technology commercialisation and industry partnerships given the policy constraints.
The message is loud and clear, time to wake up and find ways of sustaining your R&D!

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