Deloitte in India has recently launched a paper on ‘Research & Development expenditure’ that focuses on the development of R&D in India and tax benefits and incentives being provided for its growth.
According to the paper, India is on a path to become a technology driven superpower in the coming years. The country’s large talent pool of engineers and scientists is the driving force behind this transformation. Comparative lower cost of the talent pool is perceived as an added advantage.
MNCs are setting up dedicated and independent R&D centres for shoring up research activities in the emerging areas of high tech designs, electronics and even pharmaceutical sector. Generally, MNCs prefer to set up captive R&D centres for their overseas entities. This is a major driving force behind India becoming an R&D powerhouse. More than 300 MNCs have setup their R&D centres in India.
Governments across the world recognise that increased R & D is an absolute necessity for the development of economy. However, given the uncertainty of R & D projects, investments in R & D may not necessarily bring in immediate benefits to the entities carrying out research. Further, investments in certain areas of R & D, may be strategically important to the country, say for instance research in Defense areas and environmentally beneficial projects. But these may not be high on the priority of corporates, given the long gestation periods. Fiscal benefits on R & D are therefore very relevant, and act as incentives to corporates to take up R & D. Countries, world over, attract R & D investments by providing benefits in the form of Tax credits, super deductions, tax exemptions, grants, etc. Certain countries provide wage bill credits as well.