Section 80RRB: Deduction on Royalty Income

Roshni Bhagtani


Section 80RRB: Deduction on Royalty Income

Provision 80RRB was introduced to encourage artistic creativity and innovations. This section permits an individual to claim a deduction for royalties received. With multiple opportunities to resort to some choose art, music, and writing, this section encourages individuals to pursue their work choice.

What is a patent?

India is considered one of the most innovative countries, with innovations emerging regularly. The innovators apply to the necessary authorities for a patent, which grants them the right to utilize the innovation for a set period.

A patent is a type of intellectual property and a government authorization that grants the holder exclusive rights to a process, design, or new invention for a set duration of time.

After an idea or product is developed, the patent holder can ensure that their rights are protected. This also enables the innovator to monetize the work and create a consistent revenue from it, in the form of Royalty.

What is Royalty?

If the invention is patented, the investor owns the exclusive rights to it. It can, however, be made available to the person who acquires the right to the innovation.

In exchange for a royalty or a percentage of the sale, depending on the terms of the agreement. The income from royalties will be determined by the deal made between the innovator and the third party.

So, royalty refers to the payment made to the owner for the use of property, specifically patents, copyright works, franchises, and so on.

Eligibility for claiming deduction under section 80RRB

You can claim a deduction under Section 80RRB if you meet the following simple requirements:

  • An individual must be a resident of India.

  • The patent should be registered under the patents act of 1970, on or after 1st April 2003.

  • The deduction is only available to individuals who own an original patent. He must be the owner of the patent.

  • Only a resident individual is qualified to claim a deduction, which implies that HUFs (Hindu Undivided family) and NRIs (non-residents of India) are not eligible to claim deduction under this clause.

Deduction Amount and Conditions to fulfill

Amount of deduction - Individuals can claim a deduction of up to Rs. 3,00,000. If the royalty earnings are less than Rs. 3 lakh, the amount earned will be allowed as a deduction.

  • The income must be earned from royalty only.

  • If the taxpayer has another source of income, just the royalty amount will be allowed as a deduction.

  • A Taxpayer must furnish an online certificate in prescribed form 10CCE signed by the person paying royalty.

Exceptions under section 80RRB

  • If the income via royalty is earned outside of India then it can be claimed as a deduction only if it is brought back to India within 6 months from the time royalty was earned.

  • The amount must be brought back in the convertible foreign exchange form.

  • It is also mandatory that the taxpayer provides the certificate stating the same in the form 10H.

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