Section 80RRB - Income Tax Deduction on Patent Royalty

Section 80RRB allows you to claim deduction on income earned against patent royalty, which means if you have done some exceptional work in either writing a book, creating an art or music and have a patent on such material (legal right as the author), any income earned from such work is non taxable according to Section 80RRB. You can claim maximum of Rs. 3 lakh in a financial year on such income earned. You can only claim this deduction if you are an Individual and resident Indian.

Let us understand more about Section 80RRB in detail.

Table of Contents

What is Section 80RRB of income tax act
Section 80RRB Deduction Conditions and Eligibility
Deductions limit under Section 80RRB
What is a Patent?
Things to know
Conclusion
Frequently Asked Questions

What is Section 80RRB of income tax act

Section 80RRB of income tax act allows you to claim deduction on income earned from patent royalty
If you have written a book or created an art or music, inventions, and have the legal right as the author (patent), anyone using such material and paying for using it will be received by you since you are the author
Such income earned in financial year can be claimed as deduction with old tax regime due to your exceptional work that will be used within and outside the country of India
Since Indians are known to have some of the best innovative minds, we Indians are encouraged to create such exceptional materials and have them patented to receive non taxable income, anytime it is used by someone else
This source of income is called Royalty Income or Royalty Payments
Royalty is an amount paid to a person by another party or person against the usage of certain work produced by the recipient
Maximum limit of Section 80RRB deduction is Rs. 3 lakh in a financial year or the amount received by you in that year, whichever is less

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Section 80RRB Deduction Conditions and Eligibility

There are certain conditions to be eligible to claim 80RRB deduction:

You must be an Individual residing in India to claim such deduction to save income tax
HUF (Hindu Undivided Family) and NRI (Non resident Indians) are not allowed to claim such deduction
You must be having the original patent of the material that is to be used to other party or patent from whom you receive payment
Not having the patent of work will not allow you to be eligible to claim 80RRB deduction for royalty income
The patent must be registered under the Patent Act, 1970
Patent must be registered on or after 1st April 2003

Deductions limit under Section 80RRB

The maximum deduction you can claim in Section 80RRB is Rs. 3 lakh, or the amount you have received in a financial year, whichever is low.

It is important to note that only individuals who are residing in India can claim this deduction. HUF and NRI cannot claim this deduction for royalty payments received for their patents.

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What is a Patent?

A patent provides the author of the work (book, art, music, invention, etc.) the legal right to receive payments from the user of such material within or outside India.

A patent that is registered under Patent Act, 1970, allows the author to receive such royalty payments without any issues. No other person can clone your work and claim his / her own work if you already have patent on such work produced by you as the author.

It is important to know that you must be the original author to have your work patented by appropriate organization.

Things to know

Below are some important points you should know to claim 80RRB deductions:

Section 80RRB allows deductions only for resident individuals in India. Hindu Undivided Families (HUFs) and non-resident Indians are not eligible to claim deductions under this section
This deduction does not apply to any consideration received for the sale of a product manufactured using a patented process or patented article for commercial use
Only the amount received as royalties is eligible for deduction. Other income sources are not considered for the purpose of claiming this deduction
Deduction under Section 80RRB is only available to original patent holders
Taxpayers who receive royalty payments from foreign sources can claim a deduction under Section 80RRB
Maximum of Rs. 3 lakh can be claimed as royalty income in financial year
It is important to have required evidence of royalty payments to claim deduction under 80RRB while filing ITR (Income Tax Return)

Conclusion

Section 80RRB of income tax act encourages you to use your creative mind as an Indian to create some exceptional work for India that can be used within or outside the country and you can claim deduction on the royalty income tat you receive for your patented work.

80RRB allows maximum of Rs. 3 lakh or amount received as royalty payment in financial year, whichever is low. Only Individual who is a Resident Indian can claim this deduction to save income tax.

Some more Reading:

Frequently Asked Questions

What is Section 80RRB of the ITR?

Section 80RRB of the income tax act allows you to claim income earned from royalty payments that you receive for your exceptional work in the form of book, art, music, invention, etc. under old tax regime, while you file your ITR.

Is 80RRB available with new tax regime?

No, Section 80RRB is not available with new tax regime. There are some other deductions available in new tax regime you can check

Can HUF claim 80RRB?

No, HUF cannot claim 80RRB deduction for patent royalty. Only Individuals you reside in India can claim this deduction.

Can NRI claim Section 80RRB?

No, NRI (non resident Indians) cannot claim 80RRB deduction.

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