A complete guide on Section 80QQB of Income Tax Act

What is Section 80QQB of the Income Tax Act?

Section 80QQB of the Income Tax Act provides a tax deduction for resident Indian authors on royalty income from their literary, artistic, or scientific books. Authors can claim a deduction of up to ₹3,00,000 per financial year, reducing their taxable income. The income must be received as regular royalties, not as lump-sum payments, and the book must be an original work. To claim this deduction, authors need certification (Form 10CCD) from the publisher verifying the royalty income. This section aims to support authors financially and encourage the creation of original works.

Who Can Claim This Deduction?

Only resident Indian authors can claim the 80QQB deduction. It is not available for non-resident authors.

What Income Qualifies for the Deduction?

The deduction applies to income earned from royalties or copyright fees. Specifically:

• Income received for literary, artistic, or scientific books.
• The book must be the author's original work.
• It covers both Indian and foreign publications.

Maximum Amount of Deduction

Authors can claim a deduction of up to ₹3,00,000 (3 lakh rupees) per financial year. If the royalty income is less than ₹3,00,000, the actual amount received can be deducted.

Conditions to Claim the Deduction

To claim the 80QQB deduction, authors must meet the following conditions:

Agreement Requirement: The author must have a formal agreement with the publisher.

Royalty Payment: The royalty payment should be for the book sales and not for any advance or lump-sum payment for publishing rights.

Income Certification: The author needs to get a certification (Form 10CCD) from the publisher, confirming the royalty income details.

How to Claim the Deduction?

Calculate Total Royalty Income: Sum up the royalty income received during the financial year.

Fill in Form 10CCD: Obtain and fill in Form 10CCD from the publisher. This form certifies the amount of royalty income.
Include in Income Tax Return (ITR): While filing the ITR, enter the royalty income under the section for 'Income from Other Sources' and then claim the 80QQB deduction under 'Deductions'.
 

Example Calculation: Let’s say an author named Rina earns ₹5,00,000 from royalties in a financial year. 

Here’s how she can calculate her deduction:

Total Royalty Income: ₹5,00,000
Maximum Deduction Allowed: ₹3,00,000
Since ₹3,00,000 is the maximum deduction allowed under 80QQB, Rina can reduce her taxable income by ₹3,00,000, even though her total royalty income is ₹5,00,000.

Benefits of 80QQB Deduction

Tax Savings: Authors can save money on their tax bill by reducing their taxable income.

Encourages Creativity: By providing financial benefits, this deduction encourages authors to create more original works.
 

Important Points to Remember

• Only resident Indian authors can claim this deduction.
• The book must be an original literary, artistic, or scientific work.
• The maximum deduction is ₹3,00,000 per financial year.
• Authors must get a certification of their royalty income from the publisher using Form 10CCD.
• By understanding and utilizing the 80QQB deduction, authors can effectively manage their tax liabilities and benefit from their creative efforts.

What is royalty?

Royalty is a payment made to the owner of intellectual property (IP) rights for the use of their work. This payment can be for various types of IP, such as patents, trademarks, copyrights, and even natural resource rights. In the context of literature and art, royalties are typically paid to authors, musicians, and artists when their work is published, performed, or reproduced. The payment is usually a percentage of the revenue generated from the use of the work, such as book sales, music streaming, or licensing deals. Royalties incentivize creators by providing them with a financial return on their intellectual property.

Exceptions for the deduction under section 80QQB

There are a few exceptions and conditions for the deduction under section 80QQB in the Indian Income Tax Act. Here are the key points:

Lump-sum Payments: The deduction is not applicable to lump-sum payments received for the transfer or assignment of rights in the book. It only applies to regular royalty income.

Foreign Income Limit: If the royalty income is received from abroad, it must be brought into India within six months from the end of the financial year, or within the extended period as allowed by the Reserve Bank of India (RBI).

Types of Works: The deduction applies only to literary, artistic, or scientific books. It does not cover journals, magazines, or any other types of publications.

Self-Employment Condition: The author must be a resident individual in India. This deduction is not available to non-residents or those who are not individual taxpayers.

Form 10CCD: To claim this deduction, the author must obtain a certification from the publisher using Form 10CCD, which confirms the details of the royalty income.

What is FORM 10CCD ?

Form 10CCD is a certification required under the Indian Income Tax Act for authors who wish to claim the 80QQB deduction on their royalty income. This form serves as an official document provided by the publisher or payer, certifying the details of the royalty income received by the author.

Key Details in Form 10CCD:

Author's Information: Name, address, and PAN (Permanent Account Number) of the author.

Publisher's Information: Name, address, and PAN of the publisher or payer.

Book Details: Title of the book(s) for which royalty is received.

Royalty Income: Specific amount of royalty income earned by the author during the financial year.

Payment Period: Details of the period during which the royalties were paid.

Purpose of Form 10CCD:

Verification: Ensures that the royalty income claimed by the author is accurate and has been duly paid by the publisher.

Compliance: Helps in maintaining proper records for tax purposes and ensures compliance with the Income Tax Act.

Deduction Claim: Enables the author to legitimately claim the 80QQB deduction when filing their income tax return.