Effect of Union Budget, 2017 on the R&D/ Intellectual Property Practices in India

Union budget that was highly waited for (after demonetization) had gained more attention also due to preponing to February 01, 2017.

As a matter of fact, every year budget has certain impact on various industries including IP industry and R&D sectors. In this article, we will try to analyze possible effects of 2017 budget on R&D/Intellectual Property (IP) Practices in India. Though there were no special funds/incentives proposed for R&D, budget did have certain announcements for indirect effect on the IP practices.

  1. With intent made clear in budget 2015 itself, in 2017 Hon’ble Finance Minister Arun Jaitley proposed that corporate income tax for smaller companies with annual turnover upto INR 50 CR be reduced to 25%.

In 2016, FM had proposed that companies with turnover less than INR 5 CR would have to pay tax less by 1% and new manufacturing companies who do not avail of any exemption would be charged only 25%.

 This move will make sure that medium size companies do not pay more tax as compared to larger companies as observed in 2015-2016, wherein 2.85 lakh companies making profit of less than INR 1 CR had to pay effective tax rate of 30.26% while 298 companies making profit of more than 500 CR paid effective tax rate of 25.90%.

This reduction in tax rate is likely to give smaller companies flexibility to invest saved 5% in R&D activities.


  1. FM also believes pushing digital transactions further would enable small and micro enterprises to access formal credit. He also made clear that Small Industries Development Bank of India (SIDBI) will be encouraged by government to refinance credit institutions which provide unsecured loans at reasonable interest rates to borrowers based on their transaction history. This is likely to give higher chances of eligibility to IP driven companies not having strong collateral.

  2. Focus on startups in 2016 seems to be continued in 2017 as well. Among the schemes announced for start-ups, eligibility for start-ups for expedited examination of Patent Applications was a great move. In 2017, government aiming to heavily utilize technology for pushing initiatives such as SWAYAM (providing opportunities for a life-long learning) and DIGIGAON (providing telemedicines, education and skills through digital technology), start-ups would never want to miss an opportunity to contribute through innovative ideas for the facilitation of implementation of schemes.

  3. In another move to encourage start-ups, in 2016 it was announced that 100% deduction would be available for any 3 consecutive assessment years out of 5 years beginning from the year in which the eligible start-up is incorporated with the condition that total turnover of eligible start-up should not exceed Rs. 25 Crore in any of the previous years beginning on or after the 1st day of April, 2016 and ending on the 31st day of March, 2021. In 2017 budget, period of 5 years has been changed to 7 years.

  4. Research and Development Cess Act, 1986 is proposed to be repealed. Reduction in tax cost to the extent of 5% (R&D cess) on technology imports. Subsequently, service tax at 15% to be paid in full.

  5. On a disappointing note, there seems to be no separate incentive for R&D.

All in all, though there seem to be some encouraging proposals nothing substantial is coming to the way of IP fraternity as was provided in last year budget in the light of Make in India Regime. But this is not totally surprising as on all fronts, budget seems to be a cautious approach (understandable in light of other measures such as demonetization and GST being radical).

Leave a Reply

Categories

Archives

  • October 2024
  • September 2024
  • August 2024
  • July 2024
  • June 2024
  • May 2024
  • April 2024
  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • February 2011
  • January 2011
  • December 2010
  • September 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010