Tax exemptions on Royalty received – 80RRB

Section 80RRB of the Income Tax Act, 1961 provides deduction to a resident patentee (including joint patentee) for the receipt of royalty in respect of a patent registered on or after 01.04.2003 under the Patent Act, 1970. It includes any royalty income from working of or use of the patent. Consideration also includes an advance payment of such royalty, which is not refundable. However, it does not include any consideration for the sale of product manufactured with the use of patented process or patented article for commercial use. Amount that can be claimed as deduction The deduction shall be the lower of Rs. 300,000 or total income earned by way of royalty. Conditions for claiming deduction:

  • If the income is earned outside India, the deduction shall be allowed on so much of income earned in foreign exchange which is brought in India within six months from the end of previous year or within such extended period as allowed by RBI or other prescribed authority.
  • Where a compulsory license is granted in respect of the patent, the income by way of royalty shall not exceed the amount of royalty settled by the controller under the terms of license.
  • For availing deduction under section 80RRB a certificate in prescribed form is required from the person responsible for making such payment.

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