This little-known govt scheme could save your business lakhs in hidden tax benefits

Indian businesses that set up in-house R&D units can unlock a basket of hidden tax breaks—from zero customs duty on imported machinery to 100% depreciation on new equipment—if they secure recognition from the government’s Department of Scientific and Industrial Research (DSIR), investment banker Sarthak Ahuja highlighted in a LinkedIn post.

The DSIR runs a recognition scheme that grants companies significant cost advantages on their research-related spend. Among the headline benefits:

• Duty-free imports of machinery and equipment.
• 5% concessional GST on capital goods and materials, even if standard rates are higher.
• 100% depreciation in the first year on qualifying R&D equipment purchases.

“These benefits apply across all products bought for an internal R&D unit,” Ahuja wrote, stressing that more companies could use the scheme to cut costs while boosting innovation.

Eligibility requirements are specific:

• The applicant must be a company under the Companies Act, in operation for at least three financial years with regular income for two years.
• It must operate in manufacturing, production, or technical research.
• It should set aside at least 1,000 sq. ft. for dedicated R&D activity, along with separate staff, premises, and accounts for the unit.

Applications are made directly to the DSIR via email (rdi-fresh@gov.in) using the checklist available at dsir.gov.in. Recognition typically takes around six months.

While few businesses are aware of the scheme, experts say it can substantially lower capital costs and make India’s innovation ecosystem more competitive globally.