There’s a persistent myth that doing “AI” earns an Indian business a fat R&D tax break. It’s worth clearing up, because the reality is narrower than the pitch — and getting it wrong is a compliance risk, not a saving. (dgm implements osFoundry, a separate company’s platform — dgm is an independent integration partner, not osFoundry, and is not a tax adviser.)

The weighted deduction is gone

For years, Section 35(2AB) offered a weighted deduction on in-house R&D — at one point 200%, later 150%. That enhancement was phased out: the deduction stepped down to 100% from assessment year 2021-22 (FY2020-21) onward (ClearTax; Tax2win). So today, qualifying scientific research earns a straight 100% deduction — you deduct what you spend, with no multiplier.

DSIR approval is the gatekeeper

Even the 100% route isn’t automatic. It applies to expenditure on an in-house R&D facility that is approved by the Department of Scientific and Industrial Research (DSIR), with the prescribed forms and reporting. Without DSIR recognition, you can’t claim under the scientific-research provisions on that basis.

Where AI fits — and where it doesn’t

This matters for AI specifically:

  • Genuine R&D — developing new algorithms, models, or technology — may qualify, if it’s real scientific research and the facility is DSIR-approved. Get a chartered accountant to assess it.
  • Routine implementation — buying an AI subscription, integrating an off-the-shelf tool, configuring a workflow — is normal business expenditure, not Section 35 research. There is no special AI tax bonus for adopting tools.

If anyone tells you “implement AI and claim a weighted R&D deduction,” treat it as a red flag.

The Income-Tax Act, 2025 caveat

India’s new Income-Tax Act, 2025 took effect on 1 April 2026, reorganising the statute. Because that date has now passed, the precise treatment and section numbering of R&D deductions should be confirmed under the new Act and current departmental guidance — older articles (including general summaries) may reference the previous structure. Always verify with a qualified professional at the time you file.

How dgm helps

dgm builds and integrates AI; it does not file or advise on tax. It won’t dress up an AI subscription as research to manufacture a deduction. What it will do is implement AI cleanly on osFoundry at transparent pricing — $399 assessment, $3,999/month implementation, no per-seat fees (INR approximate; 18% GST for domestic clients) — so your accounting treats it as the operating cost it is. For any R&D-deduction question, talk to a chartered accountant; for the AI build, talk to dgm. You can also explore the platform yourself at osFoundry.

This page is general information, not tax or legal advice. R&D-deduction rules and the Income-Tax Act, 2025 should be confirmed with a qualified tax professional before you act.