Deductions Under Section 80RRB

Last Updated on February 26, 2026

Multiple money-making avenues are available for you, including business or employment. One such avenue of income for many citizens is Royalty payments. Royalty on the patent is akin to a reward for doing awesome work. To motivate people, the Income Tax Act introduced Section 80RRB. This section provides a deduction for taxpayers’ income from royalties on a patent. The assessee is eligible to claim deductions under Section 80RRB. The main aim is to foster patenting and notable achievements by individuals in India.

This blog helps us better understand Section 80RRB, including the relevant deduction amounts, eligibility criteria, and key factors for claiming tax deductions under this section.

Overview of Section 80RRB

Section 80RRB provides a tax deduction to resident individual taxpayers while filing their income tax returns on royalty income earned from a patent. A royalty is a payment received by a patent holder in consideration for allowing another party to use their patented invention. If you receive royalty income from a patent registered under the Patents Act, 1970, you can claim a deduction under Section 80RRB of the Income Tax Act, 1961, subject to prescribed conditions.

Amount of Deduction under Section 80RRB

Under Section 80RRB, the sum deduction is the lesser of the following:

Rs. 3 lakhs, or

Income earned from the royalty of a patent

Consider the following example-

Suppose an individual receives Rs. 4.50 lakhs in royalty income from a patent they created. Their costs linked to the patent amount to Rs. 60,000.

The net royalty income is Rs. 3.9 lakhs (Rs. 4.50 lakhs – Rs. 60,000).

The individual is authorized to demand a deduction of Rs. 3 lakhs under Section 80RRB.

The remaining taxable income is Rs. 90,000 (Rs. 3.9 lakhs – Rs. 3 lakhs).

The individual needs to pay tax on Rs. 90,000 at the existing tax rates.

Treatment of Royalty from Foreign Sources

When income from royalties is received from foreign sources, the deduction can be demanded, but with additional stipulations. They are:

• The income earned abroad should be carried to India by the taxpayer in convertible foreign currency.
• The income that has been generated must be remitted back into India within a period of six months from the end of the Financial Year in which it was generated OR within the period that is stated by the Reserve Bank of India (RBI) or other applicable authority.

Facts to look for when claiming a section 80RRB deduction:

• Only income from royalties (e.g. royalty payments from licenses to use patents, along with Royalty payments made for providing Patent Information, for using a Patent, etc.) will qualify for the deduction.
• There must be a commercial agreement between the parties that clearly states the amount of Royalty and pertinent documentation must be kept for substantiation of the deduction.
• This section does not encompass income from the sale of products made using patented articles or processes.

Eligibility Criteria for Deduction under Section 80RRB

Anyone looking for deduction under Section 80RRB must fulfil the specified criteria:

• The taxpayer must be an owner or co-owner of the original patent to file for the deduction under Section 80RRB.
• Deduction is available only to Resident Individuals
• The patent holder must possess the documents that legalise the royalty payments.
• The assessee must file an income tax return.
• The original patent should be registered under the Patent Act of 1970. The patent must be registered under the Patent Act after 31^st March 2003.
• The taxpayer must present an online certificate in FORM No. 10CCE with their return. It should be signed by the proper authority.
• The taxpayer may further claim a non-refundable deduction for advance royalties.

That said, any capital gains subject to tax are not considered a royalty payment.

• No double deduction is permitted. When a deduction for any preceding year has already been recognized and validated under section 80RRB, no deduction on such income shall be sanctioned pursuant to any other provision within any relevant assessment year.

Customer Concerns in Section 80RRB

Eligibility Limitation

• Only Indian residents can claim this deduction.
• Entities, partnerships, or exclusions if the inventor is an NRI.

Patent Requisite

• The status of the patented invention needs to be registered under the Indian Patent Act, 1970.
• Any foreign patents or unregistered patents will not qualify.

Genuine Patentee Condition

• Only the true and original inventor, designated as the patentee, can claim.

• Co-inventors or assignees regularly have contentions regarding their eligibility.

Maximum Deduction Allowed

• The maximum deduction allowed is Rs. 3,00,000 or actual royalties received, whichever is lower.
• Innovators are frustrated with being capped when they have received larger royalties.

Documentation Requirements

• Must produce evidence of patent registration and contracts for royalties.

• Many taxpayers are overwhelmed with the volume of paperwork and records mandated to be compliant.

Restricted Scope

• Pertains only to patent royalties.
• Royalties from art, music, books or other intellectual property do not figure, resulting in confusion.

Timeline for Deductions under Section 80RRB

Timeline & Main Conditions

• Patent Registration Date
• Deduction is available only if the patent is registered on or after April 1, 2003, under the Patents Act, 1970.
• Patents registered before this date are not eligible.

Year of Royalty Income

• Deduction can be established in the former year in which royalty income is obtained or accrued.
• If any advance royalty is realized, a deduction is permitted pertaining to the year of actual receipt.

Claim at Filing Stage

• Deduction must be established while submitting the Income Tax Return (ITR) for that assessment year.
• Backing documents (royalty agreement, patent registration) must be supplied.

Annual Cap

• Deduction is limited to Rs 3,00,000 per year or actual royalty income, whichever is lower.
• This cap pertains to each financial year, not cumulatively.

How Kanakkupillai Assists with Section 80RRB Deductions?

The company Kanakkupillai assists innovators with Section 80RRB deductions by verifying their patents meet registration standards of the Indian Patents Act of 1970, which serves as the basis for deduction claims. The system checks whether the taxpayer holds the status of an original patentee who lives in India and registered their patent after April 1 2003. Kanakkupillai also supports the drafting of essential documents, including royalty agreements, patent certificates, and evidence of royalty income. The firm helps its clients with tax filing by ensuring that all deductions are correctly applied in their Income Tax Return (ITR) through the use of either the Rs 3,00,000 threshold or their actual royalty income, whichever results in a lower deduction amount. The company establishes which types of royalty income qualify for eligibility while preventing any potential mistakes that might lead to incorrect identification of income sources (e.g. Royalty income from music or books isn’t covered under 80RRB). The company Kanakkupillai provides guidance on using Section 80RRB deductions alongside Section 80C and Section 80QQB deductions to create effective tax-saving strategies.

Conclusion

Section 80RRB provides a valuable tax concession for assesses earning royalties on their innovations through patent ownership. The deduction has a maximum annual limit of Rs 300,000, which will encourage the development of patented products while providing substantial tax savings. In addition, the benefits of the deduction are limited to the strict eligibility criteria of Section 80RRB and its documentation requirements, and are enforceable only under the old tax regime.

FAQs

1. What is the Section 80RRB deduction?

Section 80RRB allows a resident individual to claim a deduction on royalty income received from a patent registered under the Patents Act, 1970.

2. Is royalty income taxable in India?

Yes, Royalty income is taxable under the applicable Income Tax rates or relevant DTAA provisions for non-residents.

3. What are the limitations under Section 80RRB?

If your earnings or income from royalties is received from outside India, you will get a tax deduction under 80RRB only for the income that is returned to India. This income or return must be remitted to India within six months from the end of the financial year in which the royalty is received (or within the extended period permitted by RBI).

The amount must be received in a form that can be exchanged for foreign currency.

So, the assessee is obligated to deliver the certificate or document stating the same in Form 10CCE.

4. What is the concept underlying Section 80RRB?

Section 80RRB provides a deduction for royalty income earned from a registered patent. It does not apply to income from books, music, art, or other intellectual property.

5. How much deduction is present u/s 80RRB concerning royalty income from a patent?

Eligible income is royalty from a patent registered under the Patents Act, 1970. The maximum deduction is the lower of your actual royalty and Rs 3,00,000 in a financial year. No “double dip”: the same royalty can’t be subtracted from another section.