Section 80QQB: Deductions for Royalty Income of Authors

What is Royalty?

When authors write books and give it to the publisher to publish them, the publishers earn profits by selling the books. The publishers then pay an agreed amount of their profits or sales to the authors as their compensation for writing content for the books. This compensation is called Royalty.

The amounts that are included in the royalty income are:

• Any income of the author that is earned for practicing his or her profession.
• Any income paid as a lump sum amount for any project of writing that has a copyright of a book. The book may be artistic, literary or scientific in nature.
• Any copyright fees received for the book of the author.
• Any non-refundable amount received as an advance payment of copyright fees or royalty.

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Exceptions for the Deduction under Section 80QQB

• The royalties from journals, diaries, guides, newspapers, pamphlets, and textbooks, or any of the publications of a similar nature, are not eligible for deductions under section 80QQB of Income Tax Act.
• Any royalty income from abroad should be brought into the country within a specified time period to avail the benefits of deduction.

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The Benefit of the Deduction under Section 80QQB

The benefit under this section will be available to the authors. The lower of the following will be deducted as income tax deduction:

Rs 3 Lakh
or
The actual amount received as royalty

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Who is Eligible for Tax Deduction under Section 80QQB?

Authors of India who are earning royalty or copyright income are eligible to claim deduction under section 80QQB. There are certain conditions that must be satisfied to be eligible for this tax deduction. They are:

Income earned in India:

1. The author must be a resident of India or resident but not ordinarily resident of India.
2. The content written by an author or a joint author should be work of artistic, scientific or literary nature.
3. The taxpayer must file an income tax return to claim the deduction under this section.
4. If in any case the author has not earned a lump sum amount, then 15% of the value of sale of books during the year ( before expenses) should be deducted as a benefit.
5. The author must take FORM 10CCD from the person making payment to him or her. This need not be attached with income tax return, but should be kept safe to be produced if asked by the assessing officer.
6. The taxpayer must choose to file their ITR under the old regime.

Books here do not include journals, newspapers, diaries, or textbooks for school students.

For Example:
Mr X is a resident of India and is a recognized author who writes books of an artistic nature. He gets Rs 5,00,000 as royalty income. He has a business from where he earns profits of Rs 3,00,000 per annum. Below is the working of his net income under the Income Tax Act 1961:

Income earned outside India

1. The taxpayer should bring his income from abroad to India in convertible foreign exchange.
2. The income should be brought to India within six months from the end of the year or within the period stated by the Reserve Bank of India (RBI) or other competent authority.
3. The individual must obtain a certificate of FORM 10H.

For Example:
Mr. Y is an author and writes books of a scientific nature as he is a scientist. He wrote a book for a publisher based in the UK and earned Rs. 5,00,000 as royalty on 20th April 2022, but received the remittance after six months, i.e, on 31st oct 2022.

Working of his net income will be as follows:

Since Mr. Y has received remittance from foreign publisher after six months, he will not be getting the benefit of any deduction under Section 80QQB.

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What is FORM 10CCD?

The FORM 10CCD is a type of certificate that is to be obtained by the taxpayer, i.e., the author, from the person or publisher making payment to him or her. This is a compulsory document to avail deductions under section 80QQB. This form needs to be completed and signed by the individual or entity who is making the payment of the royalty to the taxpayer.

The format of the FORM 10CCD is

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Documents Required for Claiming Deduction Under Section 80QQB

To file for deductions under Section 80QQB, you need to submit the following documents:

• Form 10CCD: Collect this form from the payer or organization that pays you the royalty. Ensure it is correctly filled and signed by the payer.
• Proof of Residency: Give a document stating your residency in India, like your PAN card, Aadhaar card, or any other acceptable proof.
• Royalty Income Proof: Upload documents such as royalty statements, bank statements, or any other document evidencing the royalty earned by you.
• Book Publication Information: Provide details like the title of the book, name of the publisher, ISBN number, and any other publication information.
• Author's Identity Proof: Upload a valid proof of identity like your Aadhaar card, PAN card, or any other document that establishes you as the author.

Authors who get income in the form of royalty or copyright income, can benefit from the deduction under Section 80QQB. If the individual is a resident or resident but not ordinarily resident of India, he or she is eligible for the deduction of Rs. 3 lakh or the royalty income, whichever is less.

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