Section 80QQB of Income Tax — Deductions on Royalty Income
Authors get a percentage of profit from the publishers upon the sale of their books. This percentage is royalty income for the authors. The Income Tax Department levies tax on this royalty income under the head ‘Profits and Gains from Business or Profession’ or ‘Income from Other Sources’. However, one can claim tax deductions against this form of income under Section 80QQB of Income Tax Act.
Who Can Avail Deduction under Section 80QQB?
Indian authors are eligible to claim tax deductions under Section 80QQB. Here are the individuals who can avail this tax benefit:
- An author has to be a resident of India.
- Only royalty earned from books coming under literary, artistic or scientific categories are eligible for a tax deduction.
Criteria to Avail Tax Deduction under Section 80QQB
A taxpayer has to fulfil the following criteria to be eligible for tax deduction under section 80QQB:
- An individual has to be a resident of India but not an ordinary resident of India.
- Tax-payer must file ITR within the due date to avail tax deduction.
- Individuals must be an author or co-author of a book which comes under the scientific or literary, or artistic category.
- If one does not receive the income as a lump sum amount, 15% value of the books that were sold (before allowing any expenses) should not be considered.
- If the income from the sale has been obtained outside India, deduction can only be claimed if the income is brought to India within 6 months from the end of year or any period as defined by the RBI. Also the author has to bring the earnings in convertible foreign exchange.
- Individuals have to obtain Form 10CCD from the payer
Amount of Deduction under Section 80QQB
As per Section 80QQB, an author can claim tax deductions of up to Rs. 3,00,000 or the total amount of income received in the form of royalty, whichever is lower.
Form 10CCD — Form to Avail Deduction under Section 80QQB
Form 10CCD is necessary for a taxpayer to avail tax benefits under Section 80CCD. The author or taxpayer should obtain the form from the individual paying the royalty. The payer should fill up and sign the form.
To download Form 10CCD, follow these steps:
Step 1: Visit https://www.incometaxindia.gov.in/pages/downloads/forms.aspx
Step 2: Find Form 10CCD.
Step 3: Once you spot it, you can download it in PDF format. Alternatively, you can choose the ‘Fillable Form’ format or the ‘e-File’ option.
Final Word
Section 80QQB of the Income Tax Act was introduced to encourage the authors in India. If you’re eligible for this benefit, make sure to claim the deduction to reduce your tax liability.
FAQs on Section 80QQB
The following are the payments considered as royalty income which are eligible for tax deduction under Section 80QQB:
1. Copyright fees
2. Amount received as a lump sum
3. Income of professional author
4. Advance payment received as royalty or copyright fees
Form 10H should be obtained by a resident of India bringing a foreign exchange in the form of income earned outside India. The income should be brought to India within six months from the end of the year or the time limit as mentioned by RBI or any other authority.
Income which cannot come under the head of salary, income from house property, profits and gains from business or profession and capital gains is termed income from other sources. It is not tax-exempt.
Income from ‘Profits and Gains of Business or Profession’ refers to the income of an individual earned by carrying on business/profession. Income eligible for tax deduction under this head is the difference between the credits one earns and business expenditures.
One should generally report royalties in Schedule E under Supplemental Income and Loss. However, if an individual is a self-employed or self-publishing author, then he/she should report it in Schedule C.
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