Deduction in respect of royalty on patents - Section 80RRB - Income Tax - Ready Reckoner - Income Tax

Deduction in respect of royalty on patents - Section 80RRB This section provides deduction to a resident patentee (including co-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 of deduction: The deduction shall be the lower of ₹ 3,00,000 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, unless assessee furnishes a certificate, in the prescribed form ( Form 10H ) within six months from the end of previous year or within such extended period as allowed by RBI or other prescribed authority along with return of Income. For availing deduction under section 80RRB a certificate in prescribed form ( Form No.10CCE ) along with the return of income is required from the person responsible for making such payment. Where a compulsory licence is granted in respect of any patent, the income by way of royalty for the purpose of allowing deduction shall not exceed the amount of royalty under the terms and conditions of a licence settled by the Controller under that Act. Note: Only those individuals that hold an original patent are eligible to apply for deduction under Section 80RRB . If any individual does not hold the original patent, he/she cannot apply for this deduction. The patent against which the royalty has been received must be registered under the Patent Act, 1970. The said patent must have been registered on or after 1st April 2003. In case due to order of controller or High Court patent revoked or name of assessee was removed from patent register as patentee then deduction allowed earlier shall be deemed to have been wrongly allowed and AO may recompute the total income of the assessee for the relevant assessment year. The taxpayer is an individual (maybe an Indian citizen or foreign citizen). He is resident India (he may be ordinarily resident or not ordinarily resident but deduction u/s 80RRB is not available if he is non-resident. Deduction under section 80RRB is not available unless it is claimed in the return of income. Royalty from outside India - Where any income is earned from source outside India on which the deduction u/s 80RRB.