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R&D Incentives in India: A Complete Guide for Manufacturing Companies

Innovation is no longer optional for businesses that want to stay competitive. Recognizing this, the Government of India offers a range of incentives to encourage companies to invest in Research & Development (R&D). However, many organizations are either unaware of these benefits or unsure about eligibility and the application process.

This blog breaks down everything you need to know about R&D incentives in India, including eligibility, benefits, certification, and common pitfalls.

R&D Incentives: Direct and Indirect Tax Benefits

Companies engaged in new product or process development can benefit from both direct and indirect tax incentives. Direct tax benefits include 100% deduction of both capital and revenue expenditure incurred on R&D activities related to new product development.

Indirect tax benefits include customs & excise duty waiver on capital equipment such as design software, prototyping tools, validation and testing equipment, and laboratory furniture and infrastructure.

Additionally, there's an excise duty exemption for 3 years on patented products sold in India, provided the patent is granted in at least two jurisdictions (India, USA, Japan, or EU).

DSIR Certification: Process, Requirements, and Benefits

The Department of Scientific & Industrial Research (DSIR), under the Ministry of Science and Technology, is the prescribed authority responsible for granting R&D recognition and approval in India.

To apply for R&D recognition, companies must submit certificate of incorporation, audited financial statements for the last 3 years, detailed R&D project reports, inventory of R&D equipment and infrastructure, and records clearly distinguishing R&D activities from routine operations.

The process, known as "In-House R&D Centre Recognition," typically takes 3 months for recognition and 4-5 months for approval including DSIR's physical inspection.