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Section 80QQB: Deduction In Respect Of Royalty Income, etc., of Authors in Respect of Certain Books Other Than Text-Books
The Income Tax Act of 1961 includes provisions about Royalty or Copyright Income in its Section 80QQB. There are deductions for authors' royalties in this section. The royalty income is subject to taxation under the categories of profit and gains from other sources, businesses, and professions. However, section 80QQB specifies the deduction given to the writers in order to save them money on taxes.
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What Does Royalty on Books Mean?
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Publishers make money from the sale of books they publish after authors submit their work to them for publication. Subsequently, the publishers compensate the writers for penning the books with a predetermined portion of their earnings or sales. This payment is referred to as royalty income on books for authors. It includes the following amounts:
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Any income the author receives from the practice of their profession
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Any lump sum payment received for authoring projects containing book copyright, which could be literary, artistic, or scientific work
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Any copyright fees associated with the author's book
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Any non-refundable sum obtained as a down payment for copyright fees or royalty
Deduction on Authors' Royalty Income Under Section 80QQB
Writers and authors draft their manuscripts and submit them to publishers. Publishers may make a hefty profit from the sales of those they publish. As a reward or remuneration for authoring books, they provide the authors a certain share of the sales or profits, referred to as royalty. The income tax department offers a deduction on the same that the writers can claim to avoid paying tax, even though it collects tax on this income under the "Profit and Gains of Business or Profession" or "Other Sources" head of income. The Income Tax Act of 1961's 80QQB covers this deduction. The benefit under this section is the actual amount earned as royalty income or Rs 3 lakh, whichever is lower.
Eligibility for Tax Deduction Under Section 80QQB
Indian authors who get royalties or copyright payments may be allowed to deduct expenses under section 80QQB. However, to be qualified for this tax deduction, you have to meet a few requirements. They are divided into two categories.
Earned Income in India
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The writer should be an Indian resident or a resident who does not typically reside in India
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Literary, scientific, or creative works should be the subject matter of articles published by one or more authors (not journals, newspapers, diaries, or school textbooks)
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To claim the deduction under this section, the taxpayer needs to file an income tax return
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In the event that the author has not received a lump sum payment, 15% of the annual book sales revenue (before expenses) should be subtracted as a deduction
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The writer has to take FORM 10CCD from the publisher/payer and keep it safe to provide to the assessing officer if required (though it need not be attached to the IT return)
Here is an example to understand the deduction better:
Mr. A is an Indian resident who writes books on science and receives Rs 5,00,000 as royalty. He also runs a business that makes him a profit of Rs 3,00,000 per annum. His net income under the Income Tax Act 1961 will be as follows:
Income from profits and gains of business- Rs 8,00,000(5,00,000 + 3,00,000)
Gross Income- Rs 8,00,000
Less- Deductions under section 80QQB (deduction limit of Royalty income or 3 lakh whichever is less)- 3,00,000
Net Income- Rs 5,00,000( 8,00,000-3,00,000)
Income Earned Outside India
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The income should be brought to India by the taxpayer (author) in convertible foreign exchange
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It should happen within six months from the year-end or within the timeline stated by the Reserve Bank of India (or other competent authority)
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The taxpayer must obtain a certificate of Form 10H
Here is an example to understand the deduction better:
Mr. B is an author who writes artistic books. He wrote a book for a US-based publisher, earning Rs. 5,00,000 as royalty on 20th May 2022 but receiving the remittance after six months i.e. on 31st Nov 2022. His net income under the Income Tax Act 1961 will be as follows:
Income from profits and gains of business- Rs 5,00,000
Gross Income- Rs 5,00,000
Less- Deductions under section 80QQB- Nil
Net Income- Rs 5,00,000
Since the writer received a remittance from a US publisher after six months, he cannot claim a deduction under Section 80QQB.
Exceptions for Deduction Under Section 80QQB
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Under section 80QQB of the Income Tax Act, royalties from journals, diaries, guides, newspapers, pamphlets, textbooks, and any publications of a similar kind are not deductible
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To qualify for the deduction, any foreign royalties must be brought into the nation within a certain amount of time
What is Form 10CCD?
The form of certificate known as FORM 10CCD is one that the taxpayer, or writer/author, must receive from the person or publisher that is paying them. In order to be eligible for deductions under section 80QQB, this document is required. This form must be filled out and signed by the person or organisation paying the taxpayer the royalties. Here is the format of Form 10CCD
Conclusion
Authors and writers who get royalties or copyright revenue are eligible for a deduction under Section 80QQB. The deduction is Rs. 3 lakh or the royalty income, whichever is smaller. Writers and authors must make the most of this legitimate deduction to minimize their taxable income and reduce their tax liability in the long run.
Frequently Asked Questions
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What are the advantages of Section 80QQB?
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When writers write books, they receive a royalty payment, which they can deduct from their income. It can be done under Section 80QQB of the Income Tax Act, 1961.
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What does royalty income mean?
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Royalties are any funds obtained as payment for authoring books or as revenue from copyright for the publication. Book publishers pay these amounts to writers as a part of the profits earned.
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How much is deductible under Section 80QQB?
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Section 80QQB permits a deduction of up to Rs. 3 lakh, or the amount of royalties received, whichever is lower.
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Is income from royalty taxable?
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The income from royalties is taxable under the IT Act. It comes under the head Income from business and profession or other sources.
Prachi Jain
Chartered Accountant
Prachi Jain is a Chartered Accountant with a passion for simplifying finance and tax-related matters through her insightful and informative blogs. With a background in finance and a deep understanding of tax regulations, Prachi has established herself as a trusted source of financial wisdom. Prachi is committed to empowering her readers with the knowledge they need to make informed financial decisions. Her expertise and dedication shine through in every blog post, helping her audience navigate the intricacies of finance and taxes with confidence. Follow Prachi Jain's blog for practical insights and guidance on managing your finances effectively.
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