Deduction in respect of royalty income, etc., of authors of certain books other than textbooks.
151(1)
Where, in the case of an individual resident in India, being an author, the gross total income includes any income, derived by him in the exercise of his profession, on account of any lump sum consideration for the assignment or grant of any of his interests in the copyright of any book being a work of literary, artistic or scientific nature, or of royalty or copyright fees (whether receivable in lump sum or otherwise) in respect of such book, there shall, as per and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such income, computed in the manner specified in sub-section (2).
151(2)
The deduction under this section shall be equal to the whole of such income referred to in sub-section (1), or an amount of three lakh rupees, whichever is less.
151(3)
Where the income by way of such royalty or the copyright fee, is not a lump sum consideration in lieu of all rights of the assessee in the book, so much of the income, before allowing expenses attributable to such income, as is in excess of 15% of the value of such books sold during the tax year shall be ignored.
151(4)
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 six months from the end of the tax year in which such income is earned or within such further period as the competent authority may allow in this behalf.
151(5)
Deduction under this section shall not be allowed unless the assessee furnishes a certificate in such form and manner, as prescribed, duly verified by any person responsible for making such payment to the assessee as referred to in sub-section (1), along with the return of income, setting forth such particulars, as prescribed.
151(6)
Deduction under this section shall not 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 prescribed authority, along with the return of income in the prescribed manner.
151(7)
Where a deduction for any tax 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 tax year.
151(8)
In this section,—
- (a) “author” includes a joint author;
- (b) “books” shall not include brochures, commentaries, diaries, guides, journals, magazines, newspapers, pamphlets, text-books for schools, tracts and other publications of similar nature, by whatever name called;
- (c) “competent authority” means the Reserve Bank of India or such other authority as is authorised under any law in force for regulating payments and dealings in foreign exchange; and
- (d) “lump sum”, in regard to royalties or copyright fees, includes an advance payment on account of such royalties or copyright fees which is not returnable.
Section Summary:
This section provides a tax deduction for resident Indian authors who earn income from royalties or lump-sum payments for the assignment or grant of copyright interests in books (excluding textbooks). The deduction is aimed at encouraging literary, artistic, and scientific works by reducing the tax burden on authors.
Key Changes:
- New Deduction for Authors: Introduces a specific deduction for authors earning income from royalties or lump-sum payments related to copyrights of books (excluding textbooks).
- Exclusion of Textbooks: Explicitly excludes textbooks, brochures, magazines, and similar publications from the definition of "books."
- Foreign Income Rules: Specifies conditions for claiming deductions on foreign income, including the requirement to bring such income into India in convertible foreign exchange within six months (or an extended period allowed by the competent authority).
- Certification Requirement: Mandates the submission of certificates from the payer and, in the case of foreign income, from the prescribed authority.
Practical Implications:
For Authors:
- Authors can claim a deduction of up to ₹3 lakh or the total royalty/copyright income, whichever is lower.
- If the royalty is not a lump-sum payment, only 15% of the book sales value is considered taxable income, with the excess being ignored.
- Authors earning foreign income must ensure it is remitted to India in convertible foreign exchange within six months (or an extended period) to qualify for the deduction.
For Payers:
- Entities paying royalties or copyright fees to authors must provide a verified certificate to the author, which the author must submit with their tax return.
Compliance Burden:
- Authors must maintain proper documentation, including certificates from payers and, if applicable, foreign income certificates.
- The deduction cannot be claimed under any other provision of the Income Tax Act if it has already been claimed under this section.
Critical Concepts:
- Lump Sum Consideration: Includes non-refundable advance payments for royalties or copyright fees.
- Books: Defined to exclude textbooks, brochures, magazines, and similar publications.
- Competent Authority: Refers to the Reserve Bank of India or any other authorized body regulating foreign exchange transactions.
- Foreign Income: Only income remitted to India in convertible foreign exchange within six months (or an extended period) qualifies for the deduction.
Compliance Steps:
Documentation:
- Obtain a certificate from the payer of royalties or copyright fees, verifying the income.
- For foreign income, obtain a certificate from the prescribed authority.
Reporting:
- Submit the certificates along with the income tax return.
- Ensure foreign income is remitted to India within six months (or an extended period) and reported accordingly.
Avoid Double Deduction:
- Do not claim a deduction under any other provision of the Income Tax Act for income already claimed under this section.
Examples:
Scenario 1: An author earns ₹2.5 lakh as royalties from a novel. They can claim a deduction of ₹2.5 lakh under this section, reducing their taxable income by this amount.
Scenario 2: An author earns ₹4 lakh as a lump-sum payment for assigning copyright of a scientific book. They can claim a deduction of ₹3 lakh (the maximum allowed), reducing their taxable income to ₹1 lakh.
Scenario 3: An author earns ₹1 lakh as royalties from a foreign publisher. To claim the deduction, they must remit this amount to India in convertible foreign exchange within six months and submit the required certificates with their tax return.
This section simplifies tax benefits for authors while ensuring compliance through proper documentation and reporting.