Deduction in Respect of Royalty on Patents [Section 80RRB]
• A resident individual, being a patentee, can claim deduction for royalty income received in respect of patents registered on or after 01-04-2003 under the Patents Act, 1970.
• Royalty means consideration (including lump sum consideration) for:
Transfer or granting of a licence of patent rights; or
Imparting information about the use or working of a patent; or
Use of patent; or
Rendering services connected to activities referred to above.
But excludes:
Consideration that is taxable as capital gains; or
Consideration for the sale of products manufactured using patented processes or patented articles for commercial use.
• Deduction is allowed for an amount equal to the income earned as royalty or Rs. 3 lakhs, whichever is lower. If there are joint owners, each can claim deduction up to Rs. 3 lakhs.
• Where a compulsory license is granted under the Patent Act, 1970, the deduction is limited to the royalty amount under the terms and conditions of a licence settled by the Controller General of Patents, Designs and Trade Marks.
• If the royalty income is earned outside India, deduction is allowed only for royalty income earned in foreign exchange that is brought to India within 6 months from the end of the previous year (or an extended period allowed by RBI or other competent authority). Assessee is required to furnish a certificate in Form 10H electronically.
• To claim the deduction, the assessee must furnish a certificate in Form 10CCE, duly signed by the Controller General of Patents, Designs and Trade Marks, filed electronically with the return of income.
• Amount claimed under this provision cannot be claimed under any other provision in any other year.