Section 80RRB of ITA, 1961 : Section 80Rrb: Deduction In Respect Of Royalty On Patents

Explanation using Example

Imagine an individual named Ravi who lives in India and has invented a new eco-friendly engine technology. After his invention, he successfully registers his patent with the Indian Patent Office on April 5, 2005, under the Patents Act, 1970. Ravi then licenses his patented technology to a car manufacturer, and in return, he receives royalty payments.

For the financial year 2022-2023, Ravi's total income includes a royalty amount of INR 500,000. Ravi can claim a deduction under Section 80RRB of the Income-tax Act, 1961, when he files his income tax return. The deduction will be the lower of the royalty received or INR 300,000. Therefore, Ravi can claim a deduction of INR 300,000, reducing his taxable income by this amount.

However, Ravi must ensure he submits the prescribed certificate from the appropriate authority along with his tax return to avail of this deduction. Additionally, if Ravi had earned any royalty income from abroad, he would need to bring that income to India in convertible foreign exchange within the stipulated time to qualify for the deduction.