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Deduction for Royalty Income of Authors

Authors write books and give it to publishers.Publishers publish them and earn profit on 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 can be claimed by the authors to save tax. This deduction is covered under 80QQB of the Income Tax Act,1961.

1. Amounts Included in Royalty Income

a.  Any Income earned by an author for practicing his profession

b.  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 author’s book

c.  Any Income received as advance payment of royalties/ copyright fees (amount which is non- refundable)

2. Amount of Deduction

Deduction available will be lower of the following:

a.  Rs 3 lakhs or

b.  The amount of royalty income received

3. 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.

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

i)  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.

4. 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 :

Particulars Amounts
Income from Profits and Gains of Business
(550,000 + 200,000)
750,000
Gross Total Income 750,000
Less : Deductions
Sec 80QQB 300,000
Net Income 450,000

b)  Mr. Ravi is a scientist and an author. He is a resident of India during the FY 2018-19 and earns income from writing books on scientific facts from a publisher based in UK . He earned Rs. 600,000 on 22nd April 2018 and received the foreign remittance after 6 months i.e 31st Oct 2018. His net income will be under :

Particulars Amounts
Income from Profits and Gains of Business 600,000
Gross Total Income 600,000
Less : Deductions
Sec 80QQB Nil
Net Income 600,000

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

 

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