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.
Indian authors are eligible to claim tax deductions under Section 80QQB. Here are the individuals who can avail this tax benefit:
A taxpayer has to fulfil the following criteria to be eligible for tax 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 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 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.
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.
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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