Writers write a novel and send it to publishers. Publishers publish them and benefit from selling it. They give the negotiated amount of income or sales made to the writers as a payment or payment for writing books. This incentive or payment is called Royalties.

Although the IT Department collects tax on this income under “Profit and Gains of Business or Profession” or “Other Sources” Head of Income, it also allows for a refund of the very same amount that may be asserted by the writers to save tax. This deduction is subject to the 80QQB of the Income Tax Act, 1961.

What is included in Royalty income?

  1. Any money obtained by the author from practicing his career.
  2. Any revenue received for any project (or offer) of a copyrighted interest in any book based on literature, arts, and science or royalty or copyright payments for a book by the author.
  3. Any Revenue earned as advance payment of royalties/copyright fees.

 How to avail the benefits of Sec 80QQB?

Income Tax On Royalty Income Of Authors

a. Therefore, specific income requirements are met in India and elsewhere in India.

  • The person who demands a deduction should be an Indian resident or resident but not generally an Indian citizen.
  • A book that comes in the genre of literary, artistic, or science work must have been written or co-authored.
  • In order to assert the exemption, the taxpayer should submit his income tax return.
  • If a person has not been given an amount of a lump sum, 15 percent (prior to actually allowing any cost) of the price of the books sold mostly during the year will be skipped.
  • The party should acquire FORM 10CCD from the party who is accountable for making the payment.

Books do not contain magazines, manuals, journals, school students’ textbooks, brochures, diaries, and other related publications.

b. Extra income Requirement Received Beyond India territory  

i) Person is permitted deduction on the profit obtained beyond Indian territory if the profit is transferred to India in convertible foreign exchange under 6 months from the ending of the year or during the time granted by RBI or any qualified body for this reason. Individuals must receive a certificate in FORM 10H.

Let’s understand it with an example

Mr. Gupta is enthusiastic regarding writing. He is an Indian citizen and a well-known writer who writes novels on literature and arts. He generates Rs. 650,000 as royalties and also owns a firm in which his earnings are Rs. 300,000 p.a. The net profits will be as follows:

Income from Profits and Gains of Business950,000
Gross Total Income950,000
Less: Deductions (Sec 80QQB)300,000
Net Income650,000