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.

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.

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.

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.

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.