Budget Reactions: KPMG welcomes extension of R&D tax deduction period

Vikram Doshi

At present, companies engaged in certain businesses are eligible for a tax deduction of 200% on certain expenditure incurred by them on in-house research and development facility. This deduction was slated to expire on 31 March 2012. 

It is proposed in the Union Budget 2012 to extend this deduction by another period of five years. The industry had demanded this benefit given that innovation has become an imperative in today's economy without which the industry will not remain competitive. This is a welcome move especially given that implementation of Direct Taxes Code is now delayed. 

The above proposals dovetail with government objective of ensuring that R&D is given enough emphasis given India's innovation standing vis-