Union Finance Minister, P.Chidambaram, on Monday announced a proposal to follow a new approach to help generate more funding for research and development in the country.

Under the new proposal, an organisation will be set up that will fund research projects selected through a competitive process and contributions to that organisation would be eligible for tax benefits.

Noting that the setting up of the organisation would require legislative changes, Mr. Chidambaram said that the process could be taken up later at the time of the regular Budget.

There is already a provision for Income Tax deduction for expenditure on scientific research, but it is limited to direct funding - it is applicable for any expenditure on in-house R&D. The new proposal will supplement this.

The Finance Minister made the announcement as part of the interim Budget for 2014-15.

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