IT Ministry wants R&D sops extension for software products, chip design companies

NEW DELHI: The ministry for electronics and information technology has given a set of recommendations to the ministry of finance ahead of the Union Budget which is likely to be presented on February 1. The wishlist includes extension of R&D benefits under Section 35(2AB) of the Income-Tax Act to software products and chip design industry.

The proposal if approved will fit in well with the government’s recent push to boost the software products ecosystem in India.

“This is expected to provide tremendous boost to intellectual property generation in the country,” said a government official, who did not wish to be identified.

“I think software products are really about packaging of intellectual product as a product and anything which fosters that vibrant intellectual property ecosystem in the country will be helpful,” said Sharad Sharma, co-founder of iSpirt.

Under the section, if a company engaged in the business of bio-technology incurs any expenditure on scientific research on in-house R&D facility as approved by the prescribed authority, a deduction of a sum equal to 200% of the expenditure will be allowed.

ET View: Give Incentives
We do need proactive policy for chip design and fabrication plants. And along with tax benefits for R&D, a one-time capital subsidy for fab plants also seems warranted to provide for infrastructural shortcomings and other rigidities. The projections suggest that the import costs of chips and mother boards can rise and soon overtake that for crude oil, if we fail to boost investment in the domestic chip design and manufacture industry. Holistic policy design for the sector would pay rich dividends, for years.