The government of India has an incentivised program wherein the Department of Scientific and Industrial Research provides recognition to software product and manufacturing companies having in- house R&D centres.
The recognition is associated with 150 percent weighted tax reduction u/s 35(2AB) of income tax act. However, there is a lot of confusion in the manufacturing industry as to what kind of expenses can be covered under the said act.
Now, to be precise, there are two types of expenses that can be included under R&D:
- Capital: Capital expenses are one time expenses e.g. plants, machinery, fixtures etc. (excluding land and building).
- Recurring: These are the expenses that incur on a regular basis e.g. raw material, utility builds, AMC’s, travelling expenses etc.
As per DSIR guidelines, both the capital as well as the recurring expenses made on R&D are eligible to be covered u/s 35(2AB).
So, have no doubts!
If you are eligible, get recognised by the DSIR and join the Big Leagues!
And, yes, you guessed it right, spread the word.