DSIR Recognition for In-House R&D & Tax Deduction
DSIR recognition is the Department of Scientific and Industrial Research’s approval of your company’s in-house R&D unit. It is the gateway to the R&D deduction under Section 35(2AB) of the Income-tax Act. We prepare the application, the R&D accounts file and the yearly DSIR returns.
What it is
DSIR recognition means the Government of India accepts your company’s research and development facility as a genuine in-house unit. The Department of Scientific and Industrial Research looks at your R&D area, staff, equipment, projects and accounts before it recognises the unit. It is open to companies registered under the Companies Act. Trusts, societies and Section 8 companies go through a different route, called SIRO recognition.
The tax benefit sits in Section 35(2AB) of the Income-tax Act, 1961. A company that has an approved in-house R&D facility can claim a deduction for qualifying R&D spending. The process runs on three DSIR forms: Form 3CK (application and agreement), Form 3CM (approval order) and Form 3CL (DSIR’s report to the tax department on eligible spend). From tax year 2026-27, the equivalent forms are Forms 11, 14 and 12 under the Income-tax Rules, 2026.
Who it applies to
Manufacturing and technology companies
Think of a Faridabad auto-parts maker with a small lab developing a new alloy for its own products. Routine quality control and testing do not count as R&D.
Companies with a dedicated R&D area
DSIR guidance expects a separate R&D facility of at least 1,000 sq ft, with dedicated staff, equipment and projects that have stated objectives.
Companies that keep R&D accounts separate
You need separate books for R&D spending, audited every year. If R&D cost sits inside general expenses, we set up the ledgers first.
Why it matters
It opens the Section 35(2AB) deduction
It allows a deduction on qualifying R&D spending for an approved facility. The old 150% weighted rate has been phased out, and today the deduction is 100% of qualifying spend.
It is evidence of real R&D
Banks, investors and grant bodies often ask for a DSIR certificate when they assess a technology company. Recognition gives them standard proof.
Wrong claims are expensive
A deduction claimed without the approval and Form 3CL is liable to be disallowed. Right paperwork from day one costs less than defending the claim later.
Documents required
About the company
- Certificate of incorporation, PAN and CIN
- Latest audited financial statements
- Details of products or processes the company makes
About the R&D unit
- Layout and area details of the R&D facility
- List of R&D staff with qualifications
- Equipment list and capital cost break-up
- R&D objectives and project summaries
About the accounts
- Separate R&D ledger for the year
- Audited statement of R&D expenditure
- Auditor’s certificate on R&D spend (Form 3CLA)
- Patents, papers or product outcomes, if any
How it works
Review eligibility and the R&D set-up
We check your facility against DSIR’s conditions and see whether your accounts separate R&D cost. You get a short gap list first, so the weak points are fixed before filing.
Prepare and submit the recognition application
We compile the application and the supporting file, which DSIR accepts as a single PDF of up to 20 MB, and submit it on the DSIR portal. DSIR may ask questions or inspect the facility.
Apply for approval under Form 3CK
Once the unit is recognised, the company applies for the Section 35(2AB) agreement. DSIR then issues the approval order in Form 3CM.
File the yearly R&D accounts and claim
Every year, we help prepare the audited R&D accounts for DSIR and follow up on Form 3CL. Then we align the claim in your income tax return. A qualified CA signs the audit and certificate.
Timelines
Recognition application
DSIR sets no fixed time for the recognition decision. It depends on your facility and on DSIR’s queries, so we give you an estimate after reviewing your file.
Form 3CL
The Delhi High Court has held that DSIR is bound to issue Form 3CL within 120 days under Rule 6(7A). We track the file and follow up.
Annual accounts and renewal
Audited R&D accounts go to DSIR by 31 October each year. File the renewal at least three months before recognition expires.
What happens if you skip it
The deduction can be disallowed
Without DSIR approval and the matching Form 3CL, the Assessing Officer can reject the Section 35(2AB) claim and add the amount back to your income.
Recognition can lapse
Here is the catch: a late renewal can leave a gap, and spending in that gap may not qualify. File well before expiry.
You can face interest and penalty
A wrong claim can mean extra tax, interest and sometimes a penalty. Replying to a notice is far easier with clean papers.
Frequently asked questions
What is DSIR recognition?
DSIR recognition is the Department of Scientific and Industrial Research’s approval of a company’s in-house R&D unit. It applies to companies registered under the Companies Act and rests on your facility, staff, projects and accounts. It supports the Section 35(2AB) tax deduction and other government schemes. We prepare the application so it reads clearly and answers DSIR’s usual questions.
Who can apply for DSIR recognition?
A company registered under the Companies Act, 1956 or 2013 with a genuine in-house R&D unit can apply. Trusts, societies and Section 8 companies apply as scientific and industrial research organisations instead. A partnership or proprietorship cannot claim Section 35(2AB). We first check which route fits you, so the application is not rejected on eligibility.
What are Forms 3CK, 3CM and 3CL?
Form 3CK is the application and agreement with DSIR, Form 3CM is DSIR’s approval order, and Form 3CL is DSIR’s report to the tax department on eligible R&D spend. From tax year 2026-27 these appear as Forms 11, 14 and 12 under the Income-tax Rules, 2026. We prepare and track each stage for you.
How much deduction does Section 35(2AB) give?
Section 35(2AB) allows a deduction of 100% of qualifying R&D expenditure for an approved facility, because the older 150% weighted rate has been phased out. Land and buildings are excluded, and overseas R&D does not qualify. We separate eligible costs from ineligible ones in your R&D accounts, so the claim stands.
How long does DSIR take to decide?
There is no fixed time for the recognition itself, since it depends on your file and any queries from DSIR. For the yearly Form 3CL, the Delhi High Court has held that DSIR must issue it within 120 days. We track each stage and respond to queries promptly, so your file does not stall.
Do I need a separate R&D account?
Yes. DSIR expects separate accounts for R&D spending, audited every year, and the audited accounts go to DSIR by 31 October. If your costs are mixed together, we set up a clean R&D ledger and cost allocation first. Where the work needs an auditor’s certificate, a practising CA signs it.
Does recognition expire?
Yes. Recognition is valid for a defined period and must be renewed. DSIR guidance advises filing the renewal at least three months before expiry, so recognition does not lapse. We keep a renewal calendar for each client and prepare the renewal file in advance, so you can keep claiming without a break.
Can a company on the lower 22% tax regime claim the deduction?
This depends on the regime you have opted for, because some deductions are restricted under the concessional regime. DSIR has also issued clarifications on Forms 3CK and 3CL for such filers. We model both regimes for your numbers before you decide, so you know the real benefit of recognition.
What it costs
Our fee plus the government fee that applies to your case, quoted before you commit. Tell us the situation and we will price it exactly.
Ready to begin?
Share what your R&D team works on and how you book its costs, and we will tell you whether DSIR recognition is worth pursuing.