Taxation on royalties from books, music, or patents in India under the Income Tax Act, 1961, rewards creators while ensuring compliance. Authors, musicians, and inventors can claim deductions, but rules vary by income source. What are the tax rates on royalties from books in India, and how do they apply to music and patents? Let’s break it down.
Royalty Income from Books and Artistic Works:
If you write a book, compose music, or create a work of art or science, and you receive copyright fees or royalties, those earnings are taxable. However, under Section 80QQB of the Income Tax Act, resident individuals (authors / creators) can claim a deduction. The deduction is the lesser of: ₹ 3,00,000 or the actual royalty income received.
For example, if your book royalties for the year are ₹ 2.5 lakh, you can deduct the full amount — effectively making it tax-free. But if you earn ₹ 5 lakh, you can deduct only ₹ 3 lakh. Note: Textbooks, journals, guides, diaries, pamphlets and similar publications are generally excluded from this deduction benefit.
Patents & Inventions: Tax Treatment and Deductions
For inventors or creators who own a registered patent and receive royalty income when someone uses that patent, taxation rules apply too. Unless exempted, royalty income from a patent is taxable. Thankfully, under Section 80RRB, a resident individual patent-holder can claim a deduction of up to ₹ 3,00,000 or the actual royalty amount — whichever is lower.
This deduction works only if you follow the old tax regime and file proper returns. Royalty income from foreign sources must typically be repatriated (in convertible foreign exchange) usually within 6 months of the end of the financial year.
Royalty Payments from Abroad or by Foreign Entities:
If you receive royalty income from foreign sources — for example, music streaming services or a foreign publisher — or pay royalties to non-residents, tax laws and withholding rules change. For payments to non-residents, the withholding tax (TDS) on royalty or fees for technical services was raised from 10% to 20% (plus applicable surcharge and cess) effective April 2023.
However, if a Double Taxation Avoidance Agreement (DTAA) applies and proper documentation is furnished, the withholding rate may be lower. Therefore, if you receive foreign royalty income, ensure that you repatriate funds in convertible foreign exchange and declare them in your ITR — while also checking DTAA benefits.
Filing Returns, Claiming Deductions and Compliance:
- Always file your ITR under the old tax regime if you wish to claim deductions under Section 80QQB (for books/music) or Section 80RRB (for patents).
- Maintain proper documentation — copyright or patent certificates, royalty agreements, payment receipts, bank statements if funds are repatriated.
- Treat royalty income appropriately: regular royalties or copyright fees go under “Business or Profession,” while occasional payments may go under “Other Sources.”
- For foreign royalty income, repatriate money in convertible currency within deadlines (usually 6 months), and show proof when claiming deductions or filing returns.
Why royalty taxation matters:
By allowing deductions for royalty income under Sections 80QQB and 80RRB, the Indian tax law encourages authors, artists and inventors to create and monetize their work. This tax benefit makes creative and innovative efforts financially more viable. With global digital platforms expanding, many Indian creators now get royalty payments from abroad. With proper compliance, they can enjoy net gains after tax even with withholding.
Conclusion:
royalties from books, music or patents are taxable in India. Whether you publish a novel, compose music, or invent something unique — it helps to know how taxes on royalties work. With correct filing and claiming deductions, you can legally reduce your tax burden on creative and intellectual earnings. Explore more financial insights now!
– Ketaki Dandekar (Team Arthology)
Read more about Taxation on Royalties from Books, Music, or Patents here – https://cleartax.in/section-80qqb