Opinion | Incentivizing private sector R&D in India
The Indian government has tried to implement the increasingly popular patent box policy but hasn't quite got it right
In recent years, many countries have experimented with tax and economic policies to stimulate home-grown innovation. These include cash grants and other types of financial support; tax credits, deductions, exemptions and holidays; and accelerated tax depreciation rates. One policy that has been rapidly gaining popularity is the ‘patent box’. While specifics may vary, all patent boxes have one common feature: they offer concessional tax rates for income accruing to patents. There are two intentions behind a patent box. The first is that it will lead to more home-grown research and development (R&D) and thus local innovation. Second, it will reduce erosion of the income tax base.