What is royalty ?

When authors write books and gives the content 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 as Royalty.

The amounts that are included 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 boak may be artistic, literary or scientific in nature
  • Any copyright fees for the book of author
  • Any amount received as an advance payment of copyright fees or royalty

Exceptions for the deduction under section 80QQB

  • The royalties from journals, diaries, guides, newspapers, pamphlets and textbooks or any of the publication of 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.

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
  • The actual amount received as royalty

Who is eligible for tax deduction under section 80QQB?

Authors of India who are earning royalty income are benefited under section 80QQB. There are two major 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 have 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.
    For Example: Mr X is a resident of India and is recognized author who writes books of 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 from profits and gains of business 8,00,000(5,00,000 + 3,00,000)
    Gross Income 8,00,000
    Less- Deductions under section 80QQB (Royalty income or 3 lakh whichever is less) 3,00,000
    Net Income 5,00,000( 8,00,000-3,00,000)
  • 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 certificate of FORM 10H.
    For Example: Mr. Y is an author and writes books of 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 2018 but received the remittance after six months i.e on 31st oct 2018.

    Working of his net income will be as follows:

    Income from profits and gains of business 5,00,000
    Gross Income 5,00,000
    Less- Deductions under section 80QQB NIL
    Net Income 5,00,000

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


What is FORM 10CCD ?

The FORM 10CCD is a type of certificate that is to be obtained by the taxpayer from the person making payment to him or her. This is a compulsory document to vail 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

FORM 10CCD

Conclusions

For the authors who get income in form of royalty are benefited with the deduction under Section 80QQB. If the individual is 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.

Frequently Asked Questions

Q- What is the benefit of Section 80QQB?

The authors get the deductions for the income earned in the form of royalty by them for writing books.


Q- What is considered as Royalty Income?

Any payment received as compensation for writing books or copyrighted works for the publication is called as Royalty.


Q- What is the deduction amount under section 80QQB?

The amount that is to be deducted under section 80QQB is Rs. 3 Lakh or the royalty income received, whichever is less.


Q- Is Income from royalty taxable?

Yes, the income from royalty is taxable under the head "Income from business and profession"

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.