Research & Development Cess Act

siddharth | Last updated: 06 August 2007

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The Research & Development Cess Act imposes a 5% cess on payments made for the import of technology. This includes payments for foreign collaboration agreements, drawings, designs, and technical personnel deputed to India. The Technology Development Board (TDB) plays a role in commercializing indigenous research and encouraging technology-oriented products. Payments for this cess should be remitted through Challan Form TR-6 to authorized branches of the Reserve Bank of India or State Bank of India.

While rendering Structuring advice involving know how transfers( “Research”) the following R & D Act may be consider from point of view of Tax implication.

Payment of R&D CESS

EXTRACTS FROM RELEVANT SECTIONS/CLAUSES OF R&D CESS ACT, 1986 (AS AMENDED IN 1995) AND R&D CESS RULES 1996 AND OTHER USEFUL INFORMATION.

The TDB is the first organisation of its kind within the government framework with the sole objective of commercialising the fruit of indegenous research. The Board plays a pro active role by encouraging enterprises to take up technology oriented products.

1. Rate of CESS - Under Section (3) of the said Act, a CESS @ 5% is levied on all payments made towards the import of technology

For the purpose of levy of CESS, "payment" shall include:

Payment made towards import of technology as approved by the Central Government in terms of any foreign collaboration agreement, or approved in accordance with the Industrial
Policy of the Government of India, in force, from time to time;
Payment made towards the cost of drawings and designs in terms of any foreign collaboration agreement as approved by the Central Government or approved in accordance with the Industrial Policy of the Government of India, in force, from time to time;
Payment made to foreign collaborators or to any other person for or in connection with deputation of technical personal to India in terms of any foreign collaboration agreement, in accordance with the approval granted by the Central Government or approved in accordance with the Industrial Policy of the Government of India, in force, from time to time;
Any other payment made towards the import of technology approved by the Central Government.

2. Challan and Head of Account for Remittance

The fee payable can be deposited through Challan Form TR-6 (form enclosed), with Reserve Bank of India or State Bank of India, Union Bank of India (authorised Branches) under Central Government Account (Receipt & Payment) Rules, 1983 .

FAQ :

The Research & Development Cess Act, 1986, is considered for tax implications when structuring advice involving know-how transfers. The Technology Development Board (TDB) aims to commercialize indigenous research and encourage technology-oriented products.

Under Section (3) of the Act, a cess of 5% is levied on all payments made towards the import of technology.

Payments include those made for the import of technology as approved by the Central Government, for drawings and designs in foreign collaboration agreements, and for the deputation of technical personnel to India.

The cess payable can be deposited through Challan Form TR-6 with authorized branches of the Reserve Bank of India, State Bank of India, or Union Bank of India.

The TDB is the first organization within the government framework with the sole objective of commercializing indigenous research and plays a proactive role in encouraging enterprises to take up technology-oriented products.