{"id":14515,"date":"2021-08-01T14:20:21","date_gmt":"2021-08-01T08:50:21","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=14515"},"modified":"2022-02-16T23:24:12","modified_gmt":"2022-02-16T17:54:12","slug":"deduction-in-respect-of-royalty-income-royalty","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/","title":{"rendered":"Deduction in respect of Royalty income"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69ede8d32400f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69ede8d32400f\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#What_is_the_Deduction_in_respect_of_royalty_income_under_the_Income_Tax_Act_1961\" title=\"What is the Deduction in respect of royalty income under the Income Tax Act, 1961\">What is the Deduction in respect of royalty income under the Income Tax Act, 1961<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#BRIEF_INTRODUCTION\" title=\"BRIEF INTRODUCTION\">BRIEF INTRODUCTION<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#DEDUCTION_UNDER_SECTION_80QQB\" title=\"DEDUCTION UNDER SECTION 80QQB\">DEDUCTION UNDER SECTION 80QQB<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#CONDITION_FOR_CLAIMING_DEDUCTION\" title=\"CONDITION FOR CLAIMING DEDUCTION \">CONDITION FOR CLAIMING DEDUCTION <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#PROCEDURE_FOR_CLAIMING_DEDUCTION\" title=\"PROCEDURE FOR CLAIMING DEDUCTION\">PROCEDURE FOR CLAIMING DEDUCTION<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#DEDUCTION_UNDER_SECTION_80RRB\" title=\"DEDUCTION UNDER SECTION 80RRB\">DEDUCTION UNDER SECTION 80RRB<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#DEDUCTION_UNDER_SECTION_80RRB_OF_INCOME_TAX_ACT_1961\" title=\"DEDUCTION UNDER SECTION 80RRB OF INCOME TAX ACT, 1961\">DEDUCTION UNDER SECTION 80RRB OF INCOME TAX ACT, 1961<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#AMOUNT_OF_DEDUCTION_AVAILABLE_%E2%80%93UNDER_SECTION_80RRB\" title=\"AMOUNT OF DEDUCTION AVAILABLE &#8211;UNDER SECTION 80RRB\">AMOUNT OF DEDUCTION AVAILABLE &#8211;UNDER SECTION 80RRB<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#ROYALTY_RECEIVED_BY_NON-RESIDENTS_SECTION_44DA\" title=\"ROYALTY RECEIVED BY NON-RESIDENTS (SECTION 44DA)\">ROYALTY RECEIVED BY NON-RESIDENTS (SECTION 44DA)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#SECTION_44DA_OF_INCOME_TAX_ACT_1961\" title=\"SECTION 44DA OF INCOME TAX ACT 1961\">SECTION 44DA OF INCOME TAX ACT 1961<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#key_points_of_Taxation_of_Royalty_Income\" title=\"key points of Taxation of Royalty Income\">key points of Taxation of Royalty Income<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#DEDUCTION_UNDER_SECTION_194J\" title=\"DEDUCTION UNDER SECTION 194J\">DEDUCTION UNDER SECTION 194J<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#DIRECT_TAX_DTAA_TAXATION_ASPECT_ROYALTY_RECEIVED\" title=\"DIRECT TAX &amp; DTAA TAXATION ASPECT ROYALTY RECEIVED:\">DIRECT TAX &amp; DTAA TAXATION ASPECT ROYALTY RECEIVED:<\/a><ul class='ez-toc-list-level-4'><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/carajput.com\/blog\/deduction-in-respect-of-royalty-income-royalty\/#Implications_of_taxation_aspects_for_other_Intellectual_Property_Rights_IPR\" title=\"Implications of taxation aspects for other Intellectual Property Rights (IPR)\">Implications of taxation aspects for other Intellectual Property Rights (IPR)<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-14519\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/Tax-Deducations..jpg\" alt=\"\" width=\"970\" height=\"485\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/Tax-Deducations..jpg 600w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/Tax-Deducations.-300x150.jpg 300w\" sizes=\"(max-width: 970px) 100vw, 970px\" \/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_is_the_Deduction_in_respect_of_royalty_income_under_the_Income_Tax_Act_1961\"><\/span><strong><span lang=\"EN-IN\" style=\"color: navy;\">What is the Deduction in respect of royalty income under the Income Tax Act, 1961<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"BRIEF_INTRODUCTION\"><\/span><span style=\"color: #000080;\"><strong>BRIEF INTRODUCTION<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>An author earns income by publishing their book. The publisher publishes the author\u2019s book\u00a0and also the\u00a0author gets the profit against\u00a0the overall\u00a0number of books sold.<\/p>\n<p>The said amount of profit earned by them is termed royalty income. An author is a person, who uses his skill, knowledge to write something for his readers. Nowadays the author writes books, articles and publishes their write au fait on many platforms.<\/p>\n<p>An author basically enters into a contract with the publisher, in order to sell his books, however, a writer enters into a contract with the director, in order to cast and direct his story in a film or any visual presentation.<\/p>\n<p>Once it is done, the writer gets their money from the publisher, and the same be termed as royalty income for the author.<\/p>\n<p>Thus, where an author receives such\u00a0form of\u00a0royalty income, they can claim <a href=\"https:\/\/carajput.com\/blog\/all-about-tan\/amp\/\">deductions<\/a> under Section 80QQB of<a href=\"https:\/\/carajput.com\/blog\/taxes-on-income-received-from-blogging-under-income-tax\/\">\u00a0Income<\/a> Tax\u00a0Act 1961.<\/p>\n<figure id=\"attachment_14528\" aria-describedby=\"caption-attachment-14528\" style=\"width: 977px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-14528\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/TaxabilityofRoyaltySectionRoyaltySection44DA.jpg\" alt=\"Taxability of Royalty Section Royalty Section 44DA\" width=\"977\" height=\"543\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/TaxabilityofRoyaltySectionRoyaltySection44DA.jpg 864w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/TaxabilityofRoyaltySectionRoyaltySection44DA-300x167.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/TaxabilityofRoyaltySectionRoyaltySection44DA-768x427.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/TaxabilityofRoyaltySectionRoyaltySection44DA-800x444.jpg 800w\" sizes=\"(max-width: 977px) 100vw, 977px\" \/><figcaption id=\"caption-attachment-14528\" class=\"wp-caption-text\"><strong style=\"color: #000080; font-size: 16px;\">GROSS TOTAL INCOME<\/strong><\/figcaption><\/figure>\n<p>In order to avail, the benefit of deduction available under Section 80QQB of the Income Tax Act, the Gross Total Income of the author shall be computed as follows &#8211;<\/p>\n<ol>\n<li>If an author derived his income from his profession;<\/li>\n<li>If an author obtained an income from writing a book of his interest in respect of the copyright of his books being\u00a0a piece\u00a0of literary, scientific or artistic;<\/li>\n<li>\u00a0An author receives an advance payment of royalty but royalty shouldn\u2019t be non- refundable. Read our articles:<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"DEDUCTION_UNDER_SECTION_80QQB\"><\/span><span style=\"color: #ff0000;\"><strong>DEDUCTION UNDER SECTION 80QQB<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-14522 size-full\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/80.jpg\" alt=\"\" width=\"1200\" height=\"886\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/80.jpg 1200w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/80-300x222.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/80-1024x756.jpg 1024w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/80-768x567.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/80-800x591.jpg 800w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><\/p>\n<p>Where an assessee wishes to claim deductions under section 80QQB, the same shall be available up to Rs. 3,00,000 only. Or Gross total income earned by him. Or whichever is less.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"CONDITION_FOR_CLAIMING_DEDUCTION\"><\/span><span style=\"color: #000080;\"><strong>CONDITION FOR CLAIMING DEDUCTION <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>In order to claim deduction under Section 80QQB, an assessee is required to fulfill the following conditions &#8211;<\/p>\n<ol>\n<li>For claiming the\u00a0tax benefit\u00a0an assessee should be resident of India. Deduction under Section 80QQB\u00a0isn&#8217;t\u00a0available to the non-resident.<\/li>\n<li>Claiming the deduction under Section 80QQB of income tax Act 1961, an assessee should be an author. Here the author also includes the joint author which suggests that a joint author can also take a deduction under Section 80QQB.<\/li>\n<li>Content of the author\u2019s book should be artistic, literary or scientific in nature.<\/li>\n<li>The subject\u00a0of the author\u2019s books shouldn\u2019t include brochures, commentaries, diaries, journals, magazines, textbooks, pamphlets, or other publications\u00a0of comparable\u00a0nature.<\/li>\n<li>An assessee can claim the tax deductions only at the time of filing\u00a0income tax\u00a0returns.<\/li>\n<li>The quantity should be received in payment consideration. If the number isn&#8217;t received in payment consideration, income as in more than 15% of the worth of books sold during the year should be ignored.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"PROCEDURE_FOR_CLAIMING_DEDUCTION\"><\/span><span style=\"color: #000080;\"><strong>PROCEDURE FOR CLAIMING DEDUCTION<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>If\u00a0an individual\u00a0is a\u00a0resident of India\u00a0and needs\u00a0to take\u00a0the deduction under Section 80QQB then he\u00a0needs to\u00a0fill the certificate Form 10CCD<\/li>\n<li>in case of individual has earned the income from foreign, in this case, he can claim the tax deduction, if the amount brought to in India within the period of six months from the end of the relevant previous year or any other time being allotted by a competent authority. Thus, in order to avail the deduction a person would be required to fill out Form 10H.<\/li>\n<\/ul>\n<p><span style=\"color: #000080;\"><strong>EXAMPLE <\/strong><\/span><\/p>\n<p>Suppose Mrs. Bharti has written a book named \u201cMy Country\u201d and she is a Resident of India.\u00a0In a\u00a0financial year, she earns Rs. 1,00,000 as a royalty income from publishers. She is also having a\u00a0business from which she earns Rs. 5,00,000. Now if she wants\u00a0to take\u00a0the\u00a0deduction\u00a0under section 80QQB,<\/p>\n<p>She would be required to deduct the income of royalty from the gross total income. So Mrs. Bharti will be required to pay tax on Rs. 5,00,000 because she can take the deduction on Rs. 1,00,000 under 80QQB of income tax Act, 1961.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"DEDUCTION_UNDER_SECTION_80RRB\"><\/span><span style=\"color: #ff0000;\"><strong>DEDUCTION UNDER SECTION 80RRB<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-14523 size-full\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/Section-80RRB-of-Income-Tax-Act..jpg\" alt=\"\" width=\"1200\" height=\"856\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/Section-80RRB-of-Income-Tax-Act..jpg 1200w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/Section-80RRB-of-Income-Tax-Act.-300x214.jpg 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/Section-80RRB-of-Income-Tax-Act.-1024x730.jpg 1024w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/Section-80RRB-of-Income-Tax-Act.-768x548.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/Section-80RRB-of-Income-Tax-Act.-800x571.jpg 800w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><\/p>\n<ul>\n<li>The patent is basically a right, is granted to an inventor by the govt, in order to allow the inventor to restrict others from making, selling, or using the same invention for a said period of time.<\/li>\n<li>A Patent is additionally termed because the property right ensures the innovator that innovator invention is secured. If a private gets the patent, then it excludes others from making, selling, or using the invention for a specific period of your time.<\/li>\n<li>The payment which the innovator gets from inventing something is going to be termed as royalty income for the innovator. Some of the items in respect of patent is issued are chemical formulas, computer software, and hardware, drugs, medical equipment, musical instruments, etc.<\/li>\n<li>For example, let\u2019s take an example, Rohan invented a drug which cures the diseases of cancer and he applies for the patent and he gets the patent then he contains a right over these medicines.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"DEDUCTION_UNDER_SECTION_80RRB_OF_INCOME_TAX_ACT_1961\"><\/span><span style=\"color: #000080;\"><strong>DEDUCTION UNDER SECTION 80RRB OF INCOME TAX ACT, 1961<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>An individual having income in the form of royalty paid on the work pertaining to art, patents, inventions, is eligible to claim deductions under Section 80RRB of the\u00a0Income Tax\u00a0Act, 1961.<\/li>\n<\/ul>\n<p><span style=\"color: #000080;\"><strong>ELIGIBILITY -DEDUCTION UNDER SECTION 80RRB\u00a0<\/strong><\/span><\/p>\n<p>Where an individual\u00a0wished\u00a0to claim deduction under Section 80RRB of\u00a0Income Tax\u00a0Act 1961, the same would be required to satisfy\u00a0the subsequent\u00a0criteria:<\/p>\n<ol>\n<li>The person must be a Resident of India;<\/li>\n<li>Person must be the owner of a patent, in order to claim deduction under Section 80RRB. Where the person doesn\u2019t have an original patent, the same shall not be eligible for claiming tax deduction;<\/li>\n<li>An income earned by the royalties in respect of patents must have been registered under the Patent Act, 1970 on or after the 1st April 2003.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"AMOUNT_OF_DEDUCTION_AVAILABLE_%E2%80%93UNDER_SECTION_80RRB\"><\/span><span style=\"color: #000080;\"><strong>AMOUNT OF DEDUCTION AVAILABLE &#8211;<\/strong><strong>UNDER SECTION 80RRB<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The amount of deduction shall be available, based on the following criteria \u2013<\/p>\n<ol>\n<li>An individual\u00a0can claim a deduction of up to Rs 3 lakh. If their income is\u00a0above\u00a0Rs. 3 lakhs then the deduction under royalty can\u2019t\u00a0exceed the limit. However, where the royalty income\u00a0is less\u00a0than Rs. 3 lakhs, the said individual would be eligible to claim full deduction\u00a0on its\u00a0income under Section 80RRB.<\/li>\n<li>Individual can\u2019t club the income of other sources with royalty income. It implies that they&#8217;ll claim a deduction just for the amount he&#8217;s receiving from royalty.<\/li>\n<li>An Individuals who don&#8217;t hold the original patent don&#8217;t seem to be eligible for tax deduction under section 80RRB of income tax Act 1961.<\/li>\n<li>If\u00a0an individual\u00a0earns royalty income from outside India, then the deduction under section 80RRB can only be claimed within six months from\u00a0the end\u00a0of last year. However, the said deduction would be available, only upon the submission of documentary evidence to the Income-tax department. If you don\u2019t produce the document then\u00a0you&#8217;re\u00a0not eligible\u00a0to get\u00a0the deduction.<\/li>\n<li>Only those assesses can claim the\u00a0advantage of\u00a0deduction\u00a0who fulfill\u00a0the criteria\u00a0of the Indian resident. A non-resident individual is ineligible to claim deduction under Section 80RRB of\u00a0Income Tax\u00a0Act 1961.<\/li>\n<li>In respect of granting the patent, it&#8217;s an agreement between the 2 parties but in some circumstances, the govt grants the license to use patent for the general public at large. In such a situation, the govt. will settle the number of royalties with the controller who grants the legal right.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"ROYALTY_RECEIVED_BY_NON-RESIDENTS_SECTION_44DA\"><\/span><span style=\"color: #000080;\"><strong>ROYALTY RECEIVED BY NON-RESIDENTS (SECTION 44DA)<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<figure id=\"attachment_14526\" aria-describedby=\"caption-attachment-14526\" style=\"width: 977px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-14526\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/ROYALTY-RECEIVED-BY-A-NON-RESIDENTS-SECTION-44DA.png\" alt=\"ROYALTY RECEIVED BY A NON-RESIDENTS (SECTION 44DA)\" width=\"977\" height=\"547\" \/><figcaption id=\"caption-attachment-14526\" class=\"wp-caption-text\"><span style=\"color: #ffffff;\">ROYALTY RECEIVED BY A NON-RESIDENTS (SECTION 44DA)<\/span><\/figcaption><\/figure>\n<p>Section 44DA of\u00a0income tax\u00a0Act, 1961 deals with the Special provision of Income by way of royalties\u00a0within the\u00a0case of a non-resident.<\/p>\n<p>According to Section 6 of the\u00a0income tax\u00a0Act 1961, an assessee\u00a0is\u00a0qualified as a non-resident if they satisfy\u00a0anyone\u00a0of\u00a0the subsequent\u00a0conditions:<\/p>\n<ol>\n<li>In a financial year, individuals stay in India for less than 181 days; and<\/li>\n<li>Financial Year, individuals stay in India for not more than 60 days;<\/li>\n<li>If\u00a0an individual\u00a0stays in India which exceeds 60 days\u00a0in a\u00a0year\u00a0but\u00a0doesn&#8217;t\u00a0exceed\u00a0365 days\u00a0or more during the 4 previous financial years.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"SECTION_44DA_OF_INCOME_TAX_ACT_1961\"><\/span><span style=\"color: #000080;\"><strong>SECTION 44DA OF INCOME TAX ACT 1961<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<figure id=\"attachment_14530\" aria-describedby=\"caption-attachment-14530\" style=\"width: 966px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-14530\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/section-44da.png\" alt=\"SECTION 44DA OF INCOME TAX ACT 1961\" width=\"966\" height=\"537\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/section-44da.png 687w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/section-44da-300x167.png 300w\" sizes=\"(max-width: 966px) 100vw, 966px\" \/><figcaption id=\"caption-attachment-14530\" class=\"wp-caption-text\"><span style=\"color: #ffffff;\">SECTION 44DA OF INCOME TAX ACT 1961<\/span><\/figcaption><\/figure>\n<ul>\n<li>Section 44DA of the income tax Act, 1961 talks about the availability for computing income by way of royalties within the case of the non-resident. If a non-resident receives an amount in pursuance of an agreement made before the 1st April 2003 it&#8217;ll be governed by Section 44DA of the income tax Act 1961.<\/li>\n<li>If\u00a0a far-off\u00a0company or a non-resident is earning the fee for technical service or royalty income from India through a permanent establishment in India then such fee for technical service or royalty shall be computed under\u00a0the top\u00a0\u201cprofits and gains of business or profession\u201d.<\/li>\n<li>The\u00a0income tax\u00a0charges tax on all the five heads and it also provides a deduction on\u00a0the identical\u00a0that may\u00a0be claimed by the assessee\u00a0to save lots of\u00a0the tax. There are many provisions under the\u00a0tax\u00a0Act which talks about the deduction of tax when\u00a0an individual\u00a0is earning the income from royalty.<\/li>\n<li>An author\u00a0has been vested with the right\u00a0to claim deduction\u00a0under section 80QQB. The patentee can take the\u00a0advantage of\u00a0tax deduction\u00a0under section 80RRB of\u00a0tax\u00a0Act, 1961. However, If\u00a0an individual\u00a0is sharing\u00a0the information\u00a0and taking the royalty then\u00a0that may\u00a0not come under the royalty income.<\/li>\n<\/ul>\n<figure id=\"attachment_14532\" aria-describedby=\"caption-attachment-14532\" style=\"width: 1156px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-14532 size-full\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/ROYALITY-UNDER-INCOME-TAX-ACT-1961.jpg\" alt=\"U\/s 115A ROYALITY UNDER INCOME TAX ACT 1961\" width=\"1156\" height=\"1496\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/ROYALITY-UNDER-INCOME-TAX-ACT-1961.jpg 1156w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/ROYALITY-UNDER-INCOME-TAX-ACT-1961-232x300.jpg 232w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/ROYALITY-UNDER-INCOME-TAX-ACT-1961-791x1024.jpg 791w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/ROYALITY-UNDER-INCOME-TAX-ACT-1961-768x994.jpg 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/08\/ROYALITY-UNDER-INCOME-TAX-ACT-1961-800x1035.jpg 800w\" sizes=\"(max-width: 1156px) 100vw, 1156px\" \/><figcaption id=\"caption-attachment-14532\" class=\"wp-caption-text\"><strong style=\"color: #000080; font-size: 16px;\">TAXATION OF SOFTWARE PAYMENTS<\/strong><\/figcaption><\/figure>\n<p>The payment made in respect of transfer of all or any rights, including granting of license in respect of\u00a0intellectual property\u00a0like patent, design, trademark copyright, will be taxable as royalty under Section 9(1)(vi) of the\u00a0Income Tax\u00a0Act, 1961. Royalty is taxable as income deemed to arise in India and\u00a0an individual\u00a0making payment to a non-resident is obliged to deduct tax on the payment.<\/p>\n<p>However, explanation 4 was inserted in 2012, in order to provide a retrospective effect, that the transfer of right in respect of any right, property or information, includes the transfer of all or any right\u00a0to be used\u00a0or right to use computer software (including granting of a license)\u00a0no matter\u00a0the medium through which such right is transferred. The definition of royalty\u00a0within the\u00a0Double Taxation Avoidance Agreements (DTAA)\u00a0isn&#8217;t\u00a0quite as wide.<\/p>\n<p>The tax department\u2019s view regarding taxation of payments\u00a0to be used\u00a0of software\/purchase of software is that payment for grant of license- whether exclusive or non-exclusive, distribution and sale of CD carrying the software, sale\u00a0of equipment\u00a0with software would be taxable as royalty since\u00a0a part\u00a0of such payment, if not in entirety, is for copyright\u00a0within the\u00a0software.<\/p>\n<p>However, assesses in various categories \u2013 end-users, resellers, distributors took a stand that the payment\u00a0isn&#8217;t\u00a0for any copyright since no right is conveyed to the payer\/buyer of software and\u00a0it&#8217;s\u00a0not taxable as royalty.<\/p>\n<p>the distinction\u00a0between\u00a0the utilization\u00a0of\/right to use copyright and a copyrighted article or\u00a0object\u00a0containing copyrighted software was emphasized to contend that no tax is deductible on such payments.<\/p>\n<p>Moreover, since the non-residents would\u00a0value more highly to\u00a0be governed by the DTAA which\u00a0doesn&#8217;t\u00a0classify such payment as royalty, in any event, the benefit under Section 90 (2)\u00a0can be\u00a0availed\u00a0and also the\u00a0sum\u00a0wouldn&#8217;t\u00a0be chargeable to tax in India.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"key_points_of_Taxation_of_Royalty_Income\"><\/span><a href=\"https:\/\/www.caindelhiindia.com\/blog\/read-all-about-royalty-taxatio-under-income-tax-act\/\"><strong><span lang=\"EN-IN\" style=\"color: navy;\">key points of Taxation of Royalty Income<\/span><\/strong><\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The key points\u00a0within the\u00a0above-mentioned judgment which approves\u00a0the choice\u00a0of varied\u00a0High Courts and AAR in favor of the taxpayer are:<\/p>\n<ul>\n<li>The transfer of rights\u00a0should\u00a0be understood with\u00a0reference to\u00a0the Copyright Act, 1957, and grant of license without proprietary interest\u00a0isn&#8217;t\u00a0covered.<\/li>\n<li>There must be a parting with\u00a0the right\u00a0enabling the recipient to exercise\u00a0the right\u00a0enumerated\u00a0within the\u00a0Copyright Act\u00a0like the\u00a0right\u00a0to breed\u00a0the work, issue copies, etc.<\/li>\n<li>Transfer of the ownership of the physical substance, within which copyright subsists isn&#8217;t a grant of right.<\/li>\n<li>A non-exclusive, non-transferable license, merely enabling\u00a0the utilization\u00a0of a copyrighted product, is\u00a0within the\u00a0nature of restrictive conditions which are ancillary to such use,\u00a0and thus, can&#8217;t\u00a0be construed as a license, allowing complete right over the product.<\/li>\n<li>Where the core of a transaction is to authorize the end-user\u00a0to possess\u00a0access to and make use of the \u201clicensed\u201d computer\u00a0software product\u00a0over which the licensee has no exclusive rights, the same would mean that no copyright shall be parted with.<\/li>\n<li>Right\u00a0to breed\u00a0and also the\u00a0right to use computer software is distinct and separate rights and\u00a0within the\u00a0case of non-exclusive EULAs no right is parted with.<\/li>\n<\/ul>\n<p>The Supreme Court further held that changes to the domestic Act which\u00a0couldn&#8217;t\u00a0are\u00a0contemplated at the time of\u00a0getting in\u00a0the DTAA\u00a0cannot be\u00a0imported into the understanding of the term \u2018royalty\u2019 under the DTAA. Further, it also held that where the sum\u00a0isn&#8217;t\u00a0chargeable to tax as royalty, there was no\u00a0have to\u00a0deduct tax. In the matter of Pilcom v. CIT [2020] 116 taxmann.com 394\/271 Taxman 200\/425 ITR 312 (SC),<\/p>\n<p>it was held that the provisions will not apply since the\u00a0deduction\u00a0claimed, in the\u00a0case of Pilcom\u00a0wasn&#8217;t\u00a0provided under Section 195 in respect of \u201csum chargeable to tax\u201d\u00a0and therefore the\u00a0payer\u00a0failed to\u00a0have any option but to deduct tax whether the sum was ultimately taxable or not.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"DEDUCTION_UNDER_SECTION_194J\"><\/span><span style=\"color: #000080;\"><strong>DEDUCTION UNDER SECTION 194J<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The CBDT had issued Notification No.21\/2012 dated 13-6-2012 in terms of which tax has already been paid on\u00a0the primary\u00a0transfer of software either under Section 194J or Section 195, the tax\u00a0wasn&#8217;t\u00a0required to be deducted in subsequent transfers where the transferor\u00a0could be a\u00a0resident.<\/p>\n<p>Interestingly, under explanation 4, nothing was mentioned in respect of Section 194J, requiring a person making payment of any royalty to a resident to deduct tax.<\/p>\n<p>The definition of royalty is as per Section 9(1)(vi), Explanation 2. Explanation 4 which was inserted in 2012\u00a0wasn&#8217;t\u00a0included\u00a0within the\u00a0definition for purposes of Section 194J.<\/p>\n<p>It\u2019s going to\u00a0now be possible\u00a0to require\u00a0an argument that even for resident payees, the definition of royalty\u00a0isn&#8217;t\u00a0satisfied\u00a0just in case\u00a0of payment for software with limited rights to use\u00a0the identical\u00a0both on account of absence of\u00a0regard to\u00a0Explanation 4, in Section 194J\u00a0and also the\u00a0elucidation by the Supreme Court that unless\u00a0there&#8217;s\u00a0a transfer of\u00a0the correct, payment for the limited right\u00a0to work\u00a0the software\u00a0won&#8217;t\u00a0fall within the ambit of royalty.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"DIRECT_TAX_DTAA_TAXATION_ASPECT_ROYALTY_RECEIVED\"><\/span><span style=\"color: #000080;\"><strong>DIRECT TAX &amp; DTAA TAXATION ASPECT ROYALTY RECEIVED:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>under Section 5(2) of the Income Tax Act, 1961 provides that a Non-Resident is taxable in India on incomes received or deemed to be received in India and on income which accrue or arise to him in India or is deemed to accrue or arise to him in India as provided in under Section 9(1) (vi) of the Income Tax Act or Article dealing with Royalty income in the treaties (i.e. Article 12).<\/p>\n<p>If the IPR is located in India, then the consideration for its use or disposal accrues\/arises in India &amp; thus is taxable\u00a0under section 5(2)\u00a0regardless of requirement in\u00a0under section 9(1)(vi).<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Implications_of_taxation_aspects_for_other_Intellectual_Property_Rights_IPR\"><\/span><span style=\"color: #000080;\"><strong><span lang=\"EN-IN\">Implications of taxation aspects for other Intellectual Property Rights (IPR)<\/span><\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>The provisions of taxability remained mainly upon the transfer of right in respect of copyright or \u201cuse of or right to use\u201d\u00a0because of DTAA(s)\u00a0and the\u00a0amendment made to Explanation 4 to Section 9(1)(vi).<\/p>\n<p>It was held by the Supreme Court, that in order to satisfy the term use of or right to use, the copyright, interest or right must have been created in such distributor\/end-users.<\/p>\n<p>It was also held that in event of a non-exclusive license, a non-transferable license doesn&#8217;t provide or give the right to someone to enjoy the rights as a right-holder, and hence no transfer of rights or right to use can be executed.<\/p>\n<p>The IT Act covers payment for the transfer of rights yet as use just in case of other IPRs like patent, trademark, etc., under separate clauses. the excellence between copyright and other IPRs is that just in the case of copyright the making of one copy isn&#8217;t treated as infringement as per Section 52 (1) (aa) of Copyright Act, 1957.<\/p>\n<p>Similar provisions haven&#8217;t been drafted for other IPRs. Therefore, non-exclusive and restrictive permission for the use of patent and payment for such patent, shall be covered under the ambit of royalty, and under this, where the person uses the same to provide the products using the patent, uses the trademark on goods or service, in the absence of such permission, the same would be termed as infringement.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is the Deduction in respect of royalty income under the Income Tax Act, 1961 BRIEF INTRODUCTION An author earns income by publishing their book. The publisher publishes the author\u2019s book\u00a0and also the\u00a0author gets the profit against\u00a0the overall\u00a0number of books sold. The said amount of profit earned by them is termed royalty income. An author &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9909],"tags":[9990,9991],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/14515"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=14515"}],"version-history":[{"count":4,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/14515\/revisions"}],"predecessor-version":[{"id":21962,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/14515\/revisions\/21962"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=14515"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=14515"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=14515"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}