Section 80QQB – Royalty Income – Deductions under 80QQB

What is Royalty?

When authors provide their books to publishers for publication, the publishers generate profits through book sales. As a form of compensation for the authors' content creation, the publishers agree to pay a portion of their profits or sales to the authors. This compensation, known as royalty, is the authors' remuneration for their work in writing the book.

The components included in royalty income are as follows:

1. Income earned by the author for practising their profession.

2. Lump sum payments received for writing projects that have copyrights for books, whether they are artistic, literary, or scientific in nature.

3. Copyright fees received for the author's book.

4. Non-refundable amounts received as advance payments for copyright fees or royalty.

Deduction for Royalty Income of Authors

Authors write books and give them to publishers. Publishers publish them and earn profit by selling those. They pay an agreed percentage of profit or sales made to the authors as a reward or compensation for writing books. This reward or compensation is called Royalty.

While the Income tax department charges tax on this income under “Profit and Gains of Business or Profession” or “Other Sources” head of Income, it also provides a deduction on the same that the authors can claim to save tax. This deduction is covered under 80QQB of the Income Tax Act,1961.

Amounts Included in Royalty Income

• Any income earned by an author for practising his profession
• Any income earned as a lump sum payment for assignment (or grant) of any of his interests in the copyright of any book based on literary, artistic or scientific in nature or of royalty or copyright fees for the author’s book
• Any income received as advance payment of royalties/ copyright fees (amount which is non-refundable)

Amount of Deduction

Deduction available will be lower of the following:

• Rs 3 lakhs or
• The amount of royalty income received

Exceptions for the deduction under section 80QQB

Under Section 80QQB of the Income Tax Act, royalties earned from journals, diaries, guides, newspapers, pamphlets, textbooks, or similar publications are not eligible for deductions.

In addition, any royalty income received from abroad must be repatriated and brought into the country within a specified time period in order to avail the benefits of deduction under Section 80QQB.

The benefit of the deduction under section 80QQB

Authors can avail of the benefit under Section 80QQB of the Income Tax Act. They can claim an income tax deduction, whichever is lower, between Rs 3 lakh and the actual amount received as royalty.

Conditions to avail the benefit of Sec 80QQB

a. Following are certain conditions to be satisfied for income earned in India and outside India

i)  Individual claiming the deduction must be a resident in India or resident but not ordinarily resident in India.

ii) Individual must have authored or co-authored a book that falls under the category of literary, artistic or scientific work.

iii) Individual must file his income tax return to claim the deduction.

iv) If an Individual has not received a lump sum amount , 15% of the value of the books sold during the year (before allowing any expenses) should be ignored.

v)  Individual must obtain FORM 10CCD  from the person responsible for making the payment.

vi) Individual must opt to file his Income Tax Return under the old regime.

Note: Books here doesn’t include Journals, guides, newspapers, textbooks for school students, pamphlets, dairies and other publications of similar nature.

b.  Additional requirement for Income Earned outside India

Individual is allowed deduction on income earned outside India when the income is brought to India in convertible foreign exchange within 6 months from the end of the year or within the period allotted by RBI or other competent authority for this purpose. Individual must obtain a certificate in FORM 10H.

Examples

 a)  Ms. Komal is very passionate about writing.  She is a resident of India and a recognized author who writes books on Literature and art work. She earns Rs. 550,000 as her royalty income and she has a business where her  profits are Rs. 200,000 p.a. Her net income will be as under :

b)  Mr. Ravi is a scientist and an author. He is a resident of India during the FY 2023-24 and earns income from writing books on scientific facts from a publisher based in UK . He earned Rs. 600,000 on 22nd April 2023 and received the foreign remittance after 6 months i.e 31st Oct 2023. His net income will be under :

As Mr. Ravi received foreign remittance after 6 months then he will not be eligible for any deduction under section 80QQB.  

Form 10CCD Format

To claim a deduction under section 80QQB, it is necessary for the taxpayer to acquire the prescribed Form 10CCD. The Form 10CCD should be duly filled and signed by the individual or entity responsible for making the royalty payment to the taxpayer. Utilizing the provided Form 10CCD format is advisable when seeking the deduction under this particular section.