On this page
A term sheet arrives with a diligence annexure. Item 9 asks for a schedule of intellectual property with carrying values. You open last year’s audited accounts, look for your IP on the balance sheet, and find one line under non-current assets: Other intangible assets — nil. Elsewhere in the same accounts sits ₹4.2 crore of research and development expenditure across three years. The Patent Office register shows eleven applications in the company’s name, four of them granted.
Nothing has gone wrong. The zero is what Indian accounting standards require. But it is also why a founder, a CFO or a college registrar can hold a genuinely valuable portfolio and have no defensible way to say so when it matters.
This guide explains why self-created IP is kept off Indian balance sheets, what that costs in six specific situations, and what to assemble instead — before you spend anything on a formal valuation.
Quick answer
Indian accounting standards prohibit recognising most internally generated intangible assets. Under Ind AS 38 and AS 26, research spending must be expensed, development spending is capitalised only on strict conditions, and internally generated brands and customer lists can never be recognised. So a patent you invented shows at nil. A patent you bought shows at cost. The fix is not an accounting entry — it is an IP asset register, clean title, and a commercial route to value.
Why your IP sits on the balance sheet at zero
Two standards govern this in India, and which one applies to you depends on your size.
| Your company | Standard that applies |
|---|---|
| Listed (other than on an SME exchange), or unlisted with net worth of ₹250 crore or more | Ind AS 38, under the Companies (Indian Accounting Standards) Rules, 2015 |
| A holding, subsidiary, joint venture or associate company of any company in the row above | Ind AS 38 — regardless of its own net worth. A small subsidiary of a listed parent is caught |
| Everyone else — most private companies, MSMEs and standalone startups | AS 26, under the Companies (Accounting Standards) Rules, 2021 |
The two say the same thing in different words.
Ind AS 38 paragraph 54: “No intangible asset arising from research (or from the research phase of an internal project) shall be recognised.” AS 26 paragraph 41 uses almost identical language. Development-phase spending can be capitalised, but only if you can demonstrate all six conditions in Ind AS 38 paragraph 57 (AS 26 paragraph 44) — technical feasibility, intention to complete, ability to use or sell the asset, probable future economic benefits, adequate technical and financial resources, and reliable measurement of the attributable expenditure. Most Indian R&D fails the last one, not the first: nobody was tracking cost by project.
Then the absolute bar. Ind AS 38 paragraph 63: “Internally generated brands, mastheads, publishing titles, customer lists and items similar in substance shall not be recognised as intangible assets.” AS 26 paragraph 50 is the same rule. Internally generated goodwill is barred outright.
There is even a place on the balance sheet where your IP would go if it could. Schedule III to the Companies Act, 2013 requires intangible assets to be broken down into classes. Division II, which applies to Ind AS companies, lists “brands or trademarks”, “computer software”, “recipes, formulae, models, designs and prototypes” and “mining rights, copyrights, patents, other intellectual property rights, services and operating rights”; Division I, for everyone else, splits the same ground slightly differently but covers it. Most Indian innovators report zero against every one of those headings while paying renewal fees on the rights the headings describe.
This is not an Indian quirk. Brand Finance’s Global Intangible Finance Tracker, published in December 2025, estimates that 83% of global intangible asset value is unaccounted for in company financial reports. India’s own intangible value it puts at US$3.8 trillion — second in Asia. Almost none of that is on anybody’s books.
The asymmetry nobody explains
Here is the part that changes how you think about it.
Ind AS 103, which governs business combinations, says at paragraph 13 that applying its recognition principle “may result in recognising some assets and liabilities that the acquiree had not previously recognised as assets and liabilities in its financial statements”. The standard then gives the example explicitly: brand names, patents and customer relationships that the target “did not recognise as assets in its financial statements because it developed them internally and charged the related costs to expense”. Under paragraph 18, the acquirer measures them at acquisition-date fair value.
Read that from your side of the table. Your patent acquires a book value at the exact moment somebody else buys your company — and the number is set by their valuer, in their interest, for their accounts.
Indian tax law mirrors the same asymmetry. Section 33 of the Income-tax Act, 2025 — the successor to Section 32 of the 1961 Act — allows depreciation on “know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st April, 1998, not being goodwill”. The section leaves the percentage to be prescribed; for intangibles it has long stood at 25% on the written-down value. Read the operative word again: acquired. Self-generated IP has no cost in the block, so there is nothing to depreciate.
| You invented it | You bought it | |
|---|---|---|
| Balance sheet | Nil (Ind AS 38 / AS 26) | Cost, then amortised |
| Tax depreciation | None — no cost in the block | 25% WDV on intangibles |
| Recognised in an acquisition | Yes — by the buyer, at fair value | Yes |
That row is about depreciation specifically. It does not mean self-funded R&D attracts no tax relief at all — deductions for expenditure on scientific research are a separate regime, and your chartered accountant should be asked about them on their own terms.
The more original your work, the poorer your accounts look. That is the system operating as designed, not a defect to be argued with your auditor.
What the zero actually costs
Invisibility is not neutral. It has a price, and it is paid in six recognisable places.
| Situation | What the zero does to you |
|---|---|
| Fundraise or diligence | You cannot substantiate a technology premium. The investor prices what they can verify, and discounts what they cannot |
| Borrowing | No borrowing base. There is no standard IP-backed lending product in India and no dedicated regulatory framework for one |
| Acquisition | The buyer’s purchase price allocation puts the number on your IP. You are negotiating against an appraisal you did not commission |
| Distress or insolvency | An unregistered, unvalued portfolio with unclear title tends to be realised as residual scrap. Worse, a charge over IP that was never registered “shall not be taken into account by the liquidator or any other creditor” (Section 77(3), Companies Act, 2013) |
| Transfer pricing | Group companies using your IP without a documented arrangement is an exposure, not a saving, and the arm’s-length benchmark has to come from somewhere |
| Tenders and empanelment | Net-worth and capability criteria read the accounts. Your strongest asset is not in them |
Two of these deserve a plain word.
On lending. You will find commentary suggesting that the Reserve Bank of India’s 2025 directions on non-fund-based credit have opened up IP-backed financing. Check it before you rely on it. Those directions run to guarantees, co-acceptances and partial credit enhancement; the notified text does not use the words “intellectual property”, “intangible” or “IPR” at all, and its single reference to collateral is to tangible security. The IP conclusions drawn from it are inference. An Indian company borrowing against IP today is doing a bespoke, negotiated transaction: a valuation the lender accepts, a charge registered under Section 77 of the Companies Act, 2013, and a security interest a liquidator can actually enforce. Possible. Not a product on a shelf.
On acquisitions. This is the one that costs real money and gets noticed too late. The asymmetry above means the first credible valuation of your IP is often produced by the party paying for it. Arriving with your own evidence — claim charts, revenue attribution, clean title — changes what that appraisal can reasonably conclude.
India’s own numbers
Two figures frame the problem better than any argument.
In 2025, India paid US$18.76 billion in charges for the use of intellectual property and received US$1.74 billion (World Bank balance-of-payments data). We pay out nearly eleven rupees of IP licence value for every rupee we bring in. And in 2024-25 the Indian Patent Office received 110,375 patent applications and granted 33,504. The grant figure was well down on the year before, as the Annual Report itself notes, while filings held up. A busy filing economy attached to a thin licensing one.
The government has noticed. On 12 May 2026 the Ministry of Electronics and Information Technology launched IP Catalyst, implemented by C-DAC Pune with a national platform at cipie.in, expressly to bridge the gap between publicly funded R&D and industry adoption. Prof. (Dr.) Unnat P. Pandit, named in the announcement as Registrar of Copyrights, CGPDTM, called for a shift from a “Patent Filing” mindset to a “Patent → Product → Profit” approach.
Filing is now the easy part. Realising value is the part almost nobody has organised.
The IP asset register: the document most Indian companies don’t have
You cannot put your IP on the balance sheet. You can build the schedule that sits beside it: the document every buyer, lender, licensee and valuer asks for, and that almost no Indian SME or institution has ready.
| Column | What goes in it | Why it is asked for |
|---|---|---|
| Right and number | Application or registration number, type, filing and grant dates | Identifies the asset unambiguously |
| Registered owner | Exactly as it appears on the register today | Mismatches with your CIN name are common and fatal in diligence |
| Chain of title | Inventor assignments executed; every transfer recorded | Section 69 recordal is what makes the document admissible as evidence of title |
| Territory | Countries where the right subsists | An India-only right on an export product protects nothing |
| Expiry and next renewal | Legal term end and next fee date | Lapsed rights are found in week one of diligence |
| Product or revenue line | Which of your products the claims actually cover | This is the difference between an asset and a certificate |
| Evidence of use | Claim charts, product mapping, sales attribution | The highest-value document you can prepare in advance |
| Encumbrances | Charges, exclusive licences, funding or grant conditions | Undisclosed encumbrances kill deals late |
| Working statement | Form 27 status for each patent | A compliance gap that is cheap now and expensive later |
| Cost incurred | R&D, prosecution and renewal spend, from your own books | The floor of any negotiation, and it is already in your ledgers |
That last column is worth a moment. Your R&D spend is already recorded; it is simply recorded as an expense with no asset attached to it. Reorganising the same numbers by project and by right converts a cost line into a cost basis.
There is also a statutory place to talk about this, and it is under-used. Rule 8(3)(B) of the Companies (Accounts) Rules, 2014 requires the Board’s Report of every company other than a One Person Company or small company to disclose efforts towards technology absorption, the benefits derived, and the expenditure incurred on research and development. Companies file that disclosure every year in two flat lines. It is the natural place to say what the R&D produced, and what is now protected.
To be clear: an IP asset register is a management and transaction document, not a statutory financial statement. It does not go inside the balance sheet and it does not change your reported figures. It is what you hand over when someone asks the question the balance sheet cannot answer.
Building one is also where outside help starts earning its fee. Most of the ten columns can only be completed by reading the live register against your own filings, and the two that decide a deal — chain of title and product coverage — are the two an internal team is least placed to check on itself. That work sits inside IP portfolio audit and Watchdog monitoring.
Four routes from register entry to realised value
| Route | Fits when | Watch for |
|---|---|---|
| Hold and use | The IP protects your own margin | It still needs renewals, Form 27 and monitoring: cost with no visible asset |
| Licence | Another party can reach a market you cannot | The royalty base definition, audit rights and minimum guarantees decide whether money arrives |
| Assign or sell | The asset is outside your core, or maintenance exceeds its use to you | It ends your control; price it once, correctly |
| Contribute | Shares issued against IP, a JV, or a spin-out | For an unlisted company issuing shares for consideration other than cash, a registered valuer must value that consideration and report to the company |
Choosing between these is a commercial decision, not a valuation exercise. Valuation comes after, once you know which route you are taking and who the counterparty is, because the same patent honestly produces different numbers for different purposes. That is covered in detail in the companion guide on patent valuation and licensing.
Three things that stop deals
Across Indian portfolios, the same three problems surface in diligence.
Claims that read on nobody’s product. A specification drafted around a research disclosure rather than a commercial embodiment produces a valid patent that no licensee wants. It is a drafting decision made years earlier, at patent registration and prosecution stage, and it is the first thing to check.
Title that was never recorded. Under Section 69 of the Patents Act, 1970, transfers are entered in the register on Form 16 — government fee ₹1,600 on e-filing for a natural person, startup, small entity or educational institution, ₹8,000 for others, per patent, exclusive of professional fees and taxes. On a portfolio of ten, that is ₹16,000 or ₹80,000 in government fees alone. Section 69(5) is the sting: a document not entered in the register is not admitted as evidence of title unless the Controller or a court directs otherwise, for reasons recorded in writing. Companies discover this in a data room.
Missing working statements. Form 27 is filed once every three financial years with no government fee, by the patentee and separately by each licensee. Filing by one does not discharge the other.
Common mistakes
- Asking the auditor to capitalise self-created IP. They cannot; the standards forbid it, and the request costs you credibility.
- Treating a valuation as step one. Without title, evidence of use and a chosen route, a valuation is a number with nothing under it.
- Assuming the register is current. Company name changes, mergers and inventor assignments routinely go unrecorded for years.
- Confusing filing with protection, and protection with value. They are three separate achievements.
- Letting renewals run on rights the business no longer uses, while the rights it does use go unmapped.
How MYCrave can help
MYCrave Consultancy & Services runs its IP commercialization work through IP BANK India, the pillar that sits alongside protection and education. The practice record is 22,000+ IPR filings, with technical and prosecution work led by a Registered Patent Agent.
A scope note first: a statutory valuation report — for a share issue, a scheme or an insolvency process — must be signed by a registered valuer. MYCrave’s work is the IP-side foundation that any such report, or any deal, has to rest on.
- Portfolio audit and IP asset register — building the schedule above from your filings, your books and the live register, and saying plainly which rights are assets and which are renewal-fee liabilities.
- Chain-of-title cleanup — inventor assignments, name changes and Section 69 recordal in Form 16, before someone else’s lawyer finds the gap.
- Claim mapping and evidence of use — turning “we hold a patent” into “here is the product it covers”.
- Form 27 and renewal compliance for the patentee and each licensee.
- Commercialization routing through IP BANK India — listing, licensee and buyer matchmaking, negotiation and documentation, including institutional portfolios where the inventor has moved on.
Tax positions and the statutory valuation signature come from your chartered accountant and a registered valuer. MYCrave works alongside them.
Start with the schedule, not the number
Your IP on the balance sheet will read zero next year too. That is settled, and arguing with it wastes the only advantage you have, which is that you know what the portfolio covers and the market does not.
Three things are worth doing this quarter, whatever you decide about a valuation. Pull your granted claims and check whether they read on something someone is actually selling. Confirm that every transfer in your chain of title has been recorded under Section 69. And build the asset register, because every route out of the zero — licence, sale, security, share issue, defence — begins with the same document.
Frequently asked questions
Can I show my patent as an asset in the balance sheet if I get it valued?
Does that mean the R&D I spent is simply lost?
We are a college with granted patents and no income from them. Where do we start?
Can an Indian bank lend against a patent?
If we sell the patent, does the buyer get depreciation we never had?
Is an IP asset register something we have to file anywhere?
Holding IP you have never put a value on? Bring your filing numbers and the products you think they cover. MYCrave’s commercialization team will map the claims against the market, flag the title and compliance issues that stop deals, and set out the realistic licensing or transfer routes before you spend anything on a formal valuation.
Request an expert assessmentAbout this guide
- Ind AS 38 Intangible Assets (paras 48, 54, 57, 63, 68, 75, 78) and Ind AS 103 Business Combinations (paras 13, 18), as notified under the Companies (Indian Accounting Standards) Rules, 2015
- AS 26 Intangible Assets (paras 35, 41, 44, 50) under the Companies (Accounting Standards) Rules, 2021
- Schedule III to the Companies Act, 2013 (Divisions I and II); Sections 77 and 77(3), Companies Act, 2013; Rule 13(2)(i), Companies (Share Capital and Debentures) Rules, 2014; Rule 8(3)(B) and Rule 8(6), Companies (Accounts) Rules, 2014
- The Patents Act, 1970 (ss. 69, 69(5), 146) and the Patents Rules, 2003 as amended, including the First Schedule
- Income-tax Act, 2025 (s. 33, successor to s. 32 of the Income-tax Act, 1961)
- Reserve Bank of India (Non-Fund Based Credit Facilities) Directions, 2025, dated 6 August 2025
- World Bank World Development Indicators, India 2025 (BM.GSR.ROYL.CD, BX.GSR.ROYL.CD); CGPDTM Annual Report 2024-25; PIB release on the launch of IP Catalyst, 13 May 2026; Brand Finance Global Intangible Finance Tracker, 16 December 2025
Rupee figures for Patent Office filings are government fees only, from the First Schedule to the Patents Rules, current on the review date. They exclude professional fees and taxes; fees and rates change, so confirm before acting. The opening scenario is a composite written for this guide and is not a MYCrave client matter. General information, not legal, accounting or tax advice — it cannot account for the facts of your matter, and reading it does not create a professional relationship. Nothing here is a valuation, an accounting opinion, or a guarantee of any licence, sale, price or commercial outcome. Corrections: info@mycrave.co.in.