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Introduction:

Authors share in the profits publishers make from the sale of their books, which is royalty. The Tax Office taxes this royalty under the headings ‘profits and gains from trade or business’ or ‘income from other sources’. However, under Section 80QQB of the Income Tax Act, individuals can claim tax deductions on this income.

 Section 80QQB:

Section 80QQB of the Income Tax Act, 1961 is a tax saving provision that provides for deduction of royalty income for authors of particular literary, artistic, or scientific works The intention behind this provision is it will activate creativity and encourage writers to produce original and impactful works.

Under Section 80 QQB, an author can avail a deduction of up to Rs. 3,00,000 from their gross total income for the assessment year.

Royalty:

• When authors provide their books to a publisher for publication, the publisher collects a profit from book sales. In return for recognizing authors’ creative efforts, publishers agree to donate a portion of their profits or sales to authors. These shares are called royalties, and authors are paid for their literary efforts in producing a book.
• The components encompassed within royalty income include:
• A lump-sum payment received for authoring works, including copyrights to books, regardless of artistic, literary, or scientific nature.
• Non-refundable amounts if copyright fees or royalties have been paid in advance.
• Fees received for the copyright of the author’s book.
• Income generated by the author through their professional practice.

Eligible for Deduction under Section 80QQB:

• Indian authors can claim tax deduction under Section 80QQB. Here are the individuals who qualify for these tax benefits:
• The author must be a resident of India.
• Tax deductions are applicable only to royalty earned from books falling under literary, artistic, or scientific categories.

Exceptions under section 80QQB:

Under Section 80QQB of the Income Tax Act, royalties earned from journals, diaries, guides, newspapers, pamphlets, textbooks, or similar publications do not qualify for deductions.

Additionally, any royalty income received from abroad must be repatriated and brought into the country within a specified time period to avail the benefits of deduction under Section 80QQB.

Requirements for Claiming Deduction under Section 80QQB:

• To qualify for tax deduction under section 80QQB, a taxpayer must meet the following criteria:
• The individual must be a resident of India, but not an ordinary resident of India.
• Individuals must be authors or co-authors of a book falling within the scientific, literary, or artistic category.
• If the proceeds of the sale are derived outside India, deduction can be claimed only if the proceeds are brought to India within 6 months of the end of the year or at any time as defined by RBI the. In addition, the registrant must introduce income in foreign convertible currencies.
• Taxpayers must file their Income Tax Returns (ITR) within the due date to avail tax deductions.

Benefit under section 80QQB:

Authors can avail themselves of the benefit under Section 80QQB of the Income Tax Act, claiming an income tax deduction equal to the lower of Rs 3 lakh or the actual amount received as royalty.

Conditions to available Sec 80QQB:

• The individual must be the author or co-author of a work dedicated to literary, artistic, or scientific work
• If one has not made a lump sum, then 15% of the value of books sold for the year (before any deductions are allowed) should be ignored
• The individual must obtain FORM 10CCD from the person responsible for making the payment.
• Individuals claiming the deduction must be residents in India or residents but not ordinarily resident in India.

Form 10CCD :

• Form 10CCD is necessary for a taxpayer to avail tax benefits under . The author or taxpayer would obtain a form from the person paying the royalties, who would then fill it out and sign it.
• To download Form 10CCD, follow these steps:
• Step 1: Visit https://www.incometaxindia.gov.in/pages/downloads/forms.aspx
• Step 2 :Locate Form 10CCD.
• Step 3: Once you locate it, you can download it in PDF format. Alternatively, you can opt for the ‘Fillable Form’ format or the ‘e-File’ option.

conclusion:

Section 80QQB of the Income Tax Act provides a beneficial provision for authors who have published books in specific categories. The deduction on royalty income not only encourages creativity but also acknowledges authors’ contributions to society. Eligible authors should ensure they claim this deduction when filing their income tax returns.