Under the Income Tax Act, Section 80RRB was introduced to encourage innovation in India as it helps in safeguarding the interest of an individual on the patent that he owns. Let us understand Section 80RRB in brief.
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There are citizens of India who depends upon the royalty as a primary source of income either on their books, innovation, invention, music and so forth. Section 80RRB under Income Tax Act has been written keeping this in mind so that they can create and innovate.
Section 80RRB under Income Tax Act is related to those individuals whose source of income is royalty on their artwork, patent on their invention or innovation etc. The taxpayer receiving royalty is also eligible to claim deduction under this Act.
The patent is an intellectual property right authorize by Intellectual Property Act that provides an exclusive right to the owner. The rights that are included under this act includes using and selling the invention or innovation for a specific period of time. Howsoever, in order to earn royalty income, an individual has to get their invention or innovation patented.
The individual who invents and creates has all the rights over their invention and creation provided that they have patented the same. These rights include giving these inventions or creation to the third party and in return, they charge them royalty. So we can say that royalty is an income earned by the patent owner by giving the rights to the third party to use their idea. Howsoever, the amount of royalty the owner earns wholly depends upon the terms and condition of the contract between him/her and the third party.
To claim deductions against Section 80RRB the individual must satisfy the following eligibility criteria:
As mentioned before the royalties earned on the patents is eligible for deduction under Section 80RRB. Here is the list of some important points that shall be noted regarding the deduction under Section 80RRB: –
If you are an innovator or creator then to claim the deduction hassle-free, it is important to keep the above points in mind.