Electronic income

Your Questions – Income Tax: You can deduct up to Rs 3 lakh on royalty income

In either case, a deduction up to an amount of Rs 3 lakh from royalty income under Section 80QQB is permitted, provided that Form 10CCD is furnished and duly verified by the person responsible for making this payment with the return of the income.

By Chirag Nangia

Can income from royalties received from an Indian online publisher’s book sales be shown under “other income” in ITR1? Can income from advertising in these books be reported as other income in the year received? If such income is shown under “Other income” can I claim deductions for fees paid for design, online marketing etc. or up to Rs 3 lakh income tax deduction u/ s 80QQB, for art/scientific books?

—Ashiesh Kapoor

An individual residing in India, as an author, receiving royalties from an Indian publisher on book sales may offer royalty income for tax under the heading “Business or Professional Profits and Gains” or “Other sources” of the head of income. In the first case, the details of this income must be declared in the ITR 3 form and the deductible expenses can be claimed. In the latter case, the ITR 1 form must be provided and no expense can be claimed as a deduction.

In either case, a deduction up to an amount of Rs 3 lakh from royalty income under Section 80QQB is permitted, provided that Form 10CCD is furnished and duly verified by the person responsible for making this payment with the return of the income. Further, if the income includes amounts earned from any source outside India, Form no. 10H must be provided with the return of income and such income must be brought to India in convertible currency within six months of the end of the year or within the time limit specified by RBI or other competent authority.

My wife, 74 years old, has an interest income of Rs 2.4 lakh and LTCG from the sale of mutual funds of Rs 1,95,000 in the financial year 2021-22. Can she qualify for an exemption under Section 80C?

—Sankar Datta

The LTCG on the sale of equity-oriented mutual funds exceeding Rs 1 lakh is taxable at the rate of 10% plus such plus surcharge (if any) with no indexing benefit. The LTCG on the sale of debt-focused mutual funds is imposed at 20% plus cess plus surcharge after indexation. Also, no deduction is allowed u/s 80C instead of such LTCG. However, LTCG can be adjusted against the base exemption limit i.e. Rs 3 lakh. First, income outside of LTCG would be adjusted against the basic exemption limit and 80C deduction, then the residual limit of the basic exemption limit only would be adjusted against LTCG.

The screenwriter is the director, Nangia Andersen India. Send your questions to [email protected]