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, serves as 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 practicing 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.
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.
Deduction available will be lower of the following:
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.
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.
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
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.
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 :
|Income from Profits and Gains of Business (550,000 + 200,000)||750,000|
|Gross Total Income||750,000|
|Less : Deductions|
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 :
|Income from Profits and Gains of Business||600,000|
|Gross Total Income||600,000|
|Less : Deductions|
As Mr. Ravi received foreign remittance after 6 months then he will not be eligible for any deduction under section 80QQB.
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.
The authors get the deductions for the income earned in the form of royalty by them for writing books.
Any payment received as compensation for writing books or copyright income for the publication is called Royalty.
The deduction that is available under section 80QQB is Rs. 3 Lakh or the royalty amount received, whichever is less.
Yes, the income from royalty is taxable under the head Income from business and profession or other sources.