R&D spend should go up to 1 pc of GDP: Assocham

By Staff
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Google Oneindia News

New Delhi, Jan 25 (UNI) In order to minimise dependence on labour cost arbitrage, innovation and technology development has to play an imperative role and for that R&D spend has to be increased from 0.8 per cent to one per cent of GDP in 2007-08, CII said today.

To this end, the chamber has suggested to the Finance Ministry to extend Section 35 (2AB) of the Income Tax Act, which allows a weighted deduction of 150 per cent of the expenses incurred on in-house scientific research, to all industrial sectors.

Section 35 (2AB), currently, applies to companies engaged in biotechnology, pharmaceuticals, electronic equipment, computers, telecommunication equipment, chemicals and automobile manufacture.

To encourage public-private partnership in research and development (R&D) and effectively utilise the public sector science and technology capacity, CII suggested the extension of 150 per cent weighted deductions to the R&D undertaken by academic institutions and public sector R&D laboratories.

The chamber said this weighted deduction of 150 per cent of the expenses incurred on scientific research should be extended for a further period of at least 10 years.

Sub-section 5 of Section 35 (2AB) does not allow the deduction beyond March 31, 2007.

''The withdrawal of the benefit would have an adverse impact on the ongoing research activities in the multiple areas,'' CII said.

Tax exemption u/s 80 IB (8A), introduced in 2000 to encourage scientific and industrial research and development, should be extended to those Indian R&D companies which got the approval to conduct R&D on or before March 31, 2010, the chamber demanded.

Currently this provision is valid for companies approved by Department of Scientific and Industrial Research prior to March 31, 2005.

Emphasising the role of SMEs, CII asked for the creation of a central fund to encourage research work by such enterprises.

UNI

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