Budget 2011 for Pharmaceutical sector - Quick review

The budget for Pharmaceutical point of view is neutral.Allocation to Health and family welfare ministry is increased to 26,760 crore up 20% from last year.

There was no change in weighted deduction on the in-house R&D which stands at 200%.
Now many here might not know what weighed deduction on the in-house R&D means.
So for them. weighed deduction on the in-house R&D means an Indian pharma company doing in-house Reseach and development will get Tax exemption on the amount spent. The exemption would be the double of what they spend on R&D. So say a company spending 200 crore on R&D will have no tax liability on 400 crore income. This was 150% till FY 2009 and in the last budget it was increased to 200%.

So this year it stood at 200%. Apart from it there is an increase of MAT from 18% to 18.5% but it will be nullified by the decrease in the surcharge to 5% from 7.5%.
There is little bit negative that the companies in SEZ are brought under MAT so it might affect a little to the pharma companies in SEZs.

But overall the budget for Pharma sector is neutral.