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

  1. Direct Tax benefits

  • Super income tax deduction @ 100% 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 100%
  • Capex viz. equipment for R&D centre are eligible for a one time weighted deduction (accelerated depreciation) of 100% of their cost price

Example of the tax saving:


Turnover Rs. 100.00 Crores
R&D Expenses Rs. 50 Lacs (Capex) + 50 Lacs (Opex)
Total company Expenditure Rs. 80.00 Crores including R&D


Tax (@30% rate) in case of NO 35(2AB) DSIR Recognition and approval Rs. 6.00 Crores
Tax (@30% rate) in case of “35(2AB) DSIR Recognition and Approval”: Rs. 5,57,25,000
Total saving in tax: Rs. 42.75 Lacs for one year.
  1. GST Benefits
    • GST will be applicable at the lower rate of 5% for both Capital & Material purchase for R&D
  2. Other advantages
    • Tenders have pre-qualification which includes DSIR recognition for R&D centres
    • Increases company’s credibility in case of International collaborations
    • Once you are an approved R&D Centre, you are eligible for Grants/soft loans from the Government on Project to Project basis
  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


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.

This is with reference to notification No 45/2017-Central Tax (Rate) and 47/2017-integrated tax rate dated 14.11.2017 issued by the Government of India, Ministry Of Finance, and Department of revenue towards exemption pf GST under certain conditions.

As per the amendments made in the notification regarding the rate of GST in respect of Research organizations other than hospitals, the concessional rate of GST is applicable for procurement of following items for research activities.

  1. Scientific and technical instruments, apparatus and equipment (Including Computers)
  2. Accessories, parts, consumables and live animals (experimental purpose only)
  3. Computer software, Compact Disc-Read only memory, Magnetic tapes, and microfilms.
  4. Prototypes, the aggregate value of prototypes received by an organization does not exceed Fifty thousand rupees in a financial year.

To get the concessional rate of GST, the organization will have to provide a certificate to the supplier at the time of supply stating that the said goods are required for research purpose only.

Concessional GST rates for such items are mentioned below.

  1. The rates of IGST shall be 5% in case of import & interstate purchases.
  2. The rate of CGST shall be 2.5% along with SGST 2.5% in case of purchase within the state.


Scinnovation Consultants Pvt. Ltd. (SCPL) is glad to share its expertise in helping a manufacturing company to extract R&D from its facilities and structure it to make it DSIR compliant and then put together the application in a seamless manner to help you avail recognition and approval.

Reach Us