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Research n Development expense deduction

meabhijit (Project Manager) (172 Points)

01 October 2012

Hi,

A software company is engaged in outsourced R&D services for a MNC client. This is not a Joint Venture but just outsourced R&D services work of MNC done by indian vendor.

Given this, is the Indian company eligible for weighted deduction of 200 per cent on qualifying R&D expenditure?

Thanks.

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2 Replies

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 01 October 2012

As u have said ur comapny is outsourcing R&D but the deduction is available for expenditure made on In House R&D not for outsourced R&D, Read the below mentioned notification by Finance Act 2012-13

Weighted Deduction on R&D extended for 5 years, Sunset for Power sector extended

In the General Budget 2012-13 presented by the Union Finance Minister Shri Pranab Mukherjee in Lok Sabha here today, it has been proposed to provide weighted deduction for expenditure in several sectors with the objective of promoting investment and facilitating growth.

To promote investment in research and development (R&D), the Finance Minister, Shri Pranab Mukherjee said that it has been proposed to extend the weighted deduction of 200 per cent for R&D expenditure in an in-house facility beyond March 31, 2012 for a further period of five years i.e. till March 31, 2017.

It has also been proposed to provide weighted deduction of 150 per cent on expenditure incurred for agri-extension services in order to facilitate growth in the agriculture sector.

For the power sector, besides measures for accessing low cost funds, the Finance Minister Shri Mukherjee has proposed extension of the sunset date by one year for power sector undertakings so that they can be setup on or before March 31, 2013 for claiming 100 per cent deduction of profits for ten years. Additional depreciation of 20 per cent in the initial year is proposed to be extended to new assets acquired by power generation companies.