Amended and updated notes on section 80RRB of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to deduction in respect of royalty on patents.
Chapter VIA (Sections 80A to 80U) of the Income Tax Act 1961 deals with the provisions related to deductions to be made in computing total income. Section 80RRB of IT Act 1961-2023 provides for deduction in respect of royalty on patents.
Recently, we have discussed in detail section 80RRA (Deduction in respect of remuneration received for services rendered outside India) of IT Act 1961. Today, we learn the provisions of section 80RRB of Income-tax Act 1961. The amended provision of section 80RRB is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 80RRB of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section 80RRB: Deduction in respect of royalty on patents
Section 80RRB(1) of Income Tax Act
Where in the case of an assessee, being an individual, who is—
- (a) resident in India;
- (b) a patentee;
- (c) in receipt of any income by way of royalty in respect of a patent registered on or after the 1st day of April, 2003 under the Patents Act, 1970 (39 of 1970), and
his gross total income of the previous year includes royalty, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, from such income, of an amount equal to the whole of such income or three lakh rupees, whichever is less:
Provided that where a compulsory licence is granted in respect of any patent under the Patents Act, 1970 (39 of 1970), the income by way of royalty for the purpose of allowing deduction under this section shall not exceed the amount of royalty under the terms and conditions of a licence settled by the Controller under that Act :
Provided further that in respect of any income earned from any source outside India, so much of the income, shall be taken into account for the purpose of this section as is brought into India by, or on behalf of, the assessee in convertible foreign exchange within a period of six months from the end of the previous year in which such income is earned or within such further period as the competent authority referred to in clause (c) of the Explanation to section 80QQB may allow in this behalf.
Section 80RRB(2) of Income Tax Act
No deduction under this section shall be allowed unless the assessee furnishes a certificate in the prescribed form, duly signed by the prescribed authority, along with the return of income setting forth such particulars as may be prescribed.
Section 80RRB(3) of Income Tax Act
No deduction under this section shall be allowed in respect of any income earned from any source outside India, unless the assessee furnishes a certificate in the prescribed form, from the authority or authorities, as may be prescribed, along with the return of income.
Section 80RRB(4) of Income Tax Act
Where a deduction for any previous year has been claimed and allowed in respect of any income referred to in this section, no deduction in respect of such income shall be allowed, under any other provision of this Act in any assessment year.
Explanation: For the purposes of this section,—
(a) “Controller” shall have the meaning assigned to it in clause (b) of sub-section (1) of section 2 of the Patents Act, 1970 (39 of 1970);
(b) “lump sum” includes an advance payment on account of such royalties which is not returnable;
(c) “patent” means a patent (including a patent of addition) granted under the Patents Act, 1970 (39 of 1970);
(d) “patentee” means the person, being the true and first inventor of the invention, whose name is entered on the patent register as the patentee, in accordance with the Patents Act, 1970 (39 of 1970), and includes every such person, being the true and first inventor of the invention, where more than one person is registered as patentee under that Act in respect of that patent;
(e) “patent of addition” shall have the meaning assigned to it in clause (q) of sub-section (1) of section 2 of the Patents Act, 1970 (39 of 1970);
(f) “patented article” and “patented process” shall have the meanings respectively assigned to them in clause (o) of sub-section (1) of section 2 of the Patents Act, 1970 (39 of 1970);
(g) “royalty“, in respect of a patent, means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains” or consideration for sale of product manufactured with the use of patented process or of the patented article for commercial use) for—
- (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent; or
- (ii) the imparting of any information concerning the working of, or the use of, a patent; or
- (iii) the use of any patent; or
- (iv) the rendering of any services in connection with the activities referred to in sub-clauses (i) to (iii);
- (h) “true and first inventor” shall have the meaning assigned to it in clause (y) of sub-section (1) of section 2 of the Patents Act, 1970 (39 of 1970).