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TMI BlogPatent Royalty Deduction Scheme to Boost Innovation and R&D in India : Clause 152 of the Income Tax Bill, 2025 Vs. Section 80RRB of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... t also be read in conjunction with the procedural requirements articulated in Rule 19AD and Rule 29A of the Income-tax Rules, 1962, which prescribe the authorities and forms for certification of such income, especially where the income is sourced from outside India. The deduction for royalty on patents is a targeted tax incentive designed to promote innovation and reward individual inventors by providing relief on royalty income. The legislative context of such provisions is deeply rooted in policy objectives to foster research and development, encourage patent registration, and provide a competitive framework for Indian inventors in the global intellectual property regime. Objective and Purpose The primary objective of Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or other entities) who are resident and who have registered patents under the Indian law (post-2003) can claim the deduction. The focus on patents registered after 1st April 2003 is consistent with the amendments to the Patents Act and the policy shift towards incentivizing recent and future innovations. 2. Quantum of Deduction (Sub-section 2) The deduction is capped at the lower of the actual royalty income or Rs. 3 lakh per tax year. This ceiling is identical to that u/s 80RRB of the 1961 Act. The cap ensures that the benefit is targeted and does not disproportionately favor high-earning patentees, while still providing meaningful relief. 3. Compulsory Licence Scenario (Sub-section 3) Where a compulsory licence is granted under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 29A. 5. Certification and Compliance (Sub-section 5) No deduction shall be allowed unless the assessee furnishes a certificate in the prescribed form, duly signed by the prescribed authority, along with the return of income. This procedural safeguard ensures that only genuine patentees who have actually earned qualifying royalty income can claim the deduction, subject to verification by the Controller of Patents (for domestic income) or the Reserve Bank of India/authorized authority (for foreign income). This reflects the requirements u/s 80RRB(2) and the mechanisms set out in Rule 19AD (Form 10CCE, certification by Controller) and Rule 29A (Form 10H, certification for foreign income). 6. Definitions (Sub-section 7) Clause 152(7) pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign Income: The repatriation requirement encourages inventors to bring foreign earnings into India, contributing to the economy and aligning with exchange control regulations. * Regulators: The Controller of Patents and RBI are given a gatekeeping role, ensuring that only legitimate claims are processed and preventing revenue leakage. * Policy Impact: The provision supports the government's policy of promoting innovation, protecting intellectual property, and integrating Indian inventors into the global knowledge economy. Comparative Analysis with Section 80RRB, Rule 19AD and Rule 29A 1. Comparison with Section 80RRB * Eligibility: Both provisions restrict the benefit to individuals resident in India who are patentees of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill, 2025 may introduce new forms or authorities, but the underlying principle of independent verification remains unchanged. 3. Comparison with Rule 29A * Rule 29A prescribes Form No. 10H for certification u/s 80RRB(3) for foreign-sourced income and designates the RBI or other authorized authority as the certifying authority. * Clause 152(6) retains this approach, requiring certification for foreign income in the prescribed form from the prescribed authority, likely to be the RBI or an equivalent institution. * Both Rule 29A and Clause 152 thus ensure that only repatriated, verified foreign income is eligible for deduction. 4. Points of Departure and Clarification * Clause 152 provides slightly more detailed definitions, particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80RRB to Clause 152 may necessitate transitional provisions to ensure that inventors are not disadvantaged or subject to double compliance. Practical Compliance Requirements * Inventors must maintain documentary evidence of patent registration, royalty agreements, and actual receipt of royalty income. * For foreign income, inventors must ensure timely repatriation and obtain certification from the RBI or other authorized authority. * Return of income must be accompanied by the prescribed certificate (Form 10CCE for domestic income, Form 10H for foreign income under the current rules). * Inventors must track the Rs. 3 lakh cap and ensure that the same income is not claimed under multiple provisions. Comparative Perspective: In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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