Auto task force for extending R&D incentive scheme
The auto sector task force is likely to push for extending R&D incentivisation scheme for 8-10 years.
By Radhika Bhalla, |
NEW DELHI The auto sector task force is likely to push for extending R&D incentivisation scheme for 8-10 years.At present, under the scheme, the auto sector enjoys a 150% weighted deduction of expenditure on R&D for purposes of income tax. However, as of now such incentivisation is offered only on a yearly basis.
���One of the issues to be taken up in the Budget includes R&D incentivisation for the auto sector. The task force is working out the modalities for it. There is a necessity for extending the scheme for 8-10 years to ensure continuity,��� said a government official.
The scheme was introduced to encourage R&D investment by various companies in the auto sector. Under the scheme, auto companies enjoy a 150% weighted deduction of expenditure on R&D for calculation of income tax. Simply put, an expenditure of Rs 1 crore on R&D will be treated as an expenditure of Rs 1.5 crore.
To that extent, profits come down and consequently, the income tax to be paid reduces. The expenditure of Rs 1 crore will be shown in the books of accounts.
���One of the issues to be taken up in the Budget includes R&D incentivisation for the auto sector. The task force is working out the modalities for it. There is a necessity for extending the scheme for 8-10 years to ensure continuity,��� said a government official.
The scheme was introduced to encourage R&D investment by various companies in the auto sector. Under the scheme, auto companies enjoy a 150% weighted deduction of expenditure on R&D for calculation of income tax. Simply put, an expenditure of Rs 1 crore on R&D will be treated as an expenditure of Rs 1.5 crore.
To that extent, profits come down and consequently, the income tax to be paid reduces. The expenditure of Rs 1 crore will be shown in the books of accounts.
The problem with the scheme is that it is available on a yearly basis. ���Any R&D project has a minimum life cycle of two years which can also go up to five years.
Thus, if one has to commit resources to an R&D project, they must be convinced that the benefit will be available for the entire period,��� said Mr A K Taneja, president of Auto Component Manufacturers��� Association. A policy aimed at facilitating R&D must be a stable one. Only then can firms take concrete decisions with respect to investment in R&D projects, he added.
The recommendation is being made in the context of increasing demand for Indian component makers to invest in design, development and innovation.���The new requirement of the industry is that research and development work should be done in India. India���s low cost brain manpower is seen as an advantage and thus foreign OEM���s are looking at doing design work here,��� according to Mr Taneja.
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