Know About Section 80RRB of the Income Tax Act

Section 80RRB of the Indian Income Tax Act applies to individuals who create innovative works and earn an income through royalties on such patented works. It allows eligible candidates to claim tax deductions against royalties, encouraging them to produce more unique creations. Keep scrolling if you are keen to know more about this Section and other associated details.

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What Are the Eligibility Criteria to Qualify for Tax Deduction Under Section 80RRB of ITA?

Take a look at the following eligibility parameters to enjoy tax deductions under the Section 80RRB of the Income Tax Act:

Only Indian residents can qualify for tax deductions on royalty under Section 80RRB of ITA. Non-residents or HUFs are not eligible for this tax deduction.
Candidates who do not own an original patent do not qualify for such deductions. Therefore, only patent holders can enjoy this tax benefit.
The patent registration with the Patent Act of 1970 must be completed on or after 1st April 2003.
Patent holders must file income tax returns to claim tax deductions against their royalty.

What Is the Maximum Amount Eligible for Deduction Under Section 80RRB?

Individuals can claim a maximum tax deduction of up to ₹ 3,00,000 against their income received through royalty.

If the income earned through royalty is lower than ₹ 3,00,000, only that amount will qualify for tax deductions under Section 80RRB of ITA.

What Are the Conditions to Claim Deduction on Royalty from Foreign Countries?

Individuals earning royalty from a foreign country must follow the conditions listed below:

The income earned through royalty must be brought into India in convertible foreign exchange within 6 months from the end of the previous year in which income is earned.

What Are the Things to Remember While Claiming Deduction Under Section 80RRB?

Keep the information mentioned below in mind while claiming deduction under 80RRB of the Income Tax Act:

Income generated from other sources apart from the royalty is not eligible for a tax deduction.
The royalty amount is determined between two parties based on a mutual agreement. However, the Government may issue a compulsory licence to utilise the patented work in the public interest. In that case, the Controller of Patents of the Government settles the royalty amount payable towards a patent holder. The latter cannot claim tax deduction beyond that agreed amount.

Thus, Section 80RRB of ITA helps eligible candidates to claim a deduction against the royalty received and reduce their tax liabilities. Go through these pointers mentioned above carefully to avoid inconvenience later.

Frequently Asked Questions

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Is it necessary to furnish documents to claim deduction under Section 80RRB?

It is mandatory to furnish documents such as income tax returns and additional official records to claim a tax deduction under Section 80RRB.

How long does an individual receive royalty payments?

Individuals may receive fixed payments of royalty each year or a specific percentage of sales for a particular time or as specified under the royalty clause in a lease contract.

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I earn royalty income from a patent. Am I eligible to claim benefits under 80RRB?

Yes, Individuals can claim a tax deduction on royalty income of up to ₹ 3,00,000. If your royalty earnings are less than ₹ 3,00,000, then only that specific amount can be considered for deductions. You can also use an income tax calculator to estimate the benefits based on your income.

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