Special Rate of Tax on Royalty Income from Patents of Resident Indians u/s 115BBF

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Sl. No. CRITERIA CONDITIONS
1 Eligible Assessee (a)    a person resident in India and

(b)    is a patentee – means

(i)         the person(s) being the true and first inventor of the invention

(ii)       whose name(s) is/are entered on the patent register as the patentee in accordance with the Patents Act.

2 Eligible Income Income by way of royalty in respect of a patent developed and registered in India;

“royalty” in respect of a patent, means consideration

(including lump sum consideration but

excluding

(a)    any consideration which would be income of the recipient chargeable under the head “Capital Gains” or

(b)    consideration for sale of product manufactured with the use of patented processes or the patented article for commercial use)

for the –

i.            transfer of all or any rights (including the granting of any license) in respect of a patent; or

ii.            imparting of any information concerning the working of, or the use of, a patent; or

iii.            use of any patent; or

iv.            rendering of any services in connection with the activities referred to in sub-clauses (i) to (iii).

“developed” means at least 75% of Expenditure incurred in India by the eligible assessee for any invention in respect of which patent is granted under the Patents Act, 1970

3 Deductions No deduction in respect of any expenditure or allowance shall be allowed under any provision of the Income Tax Act, 1961 in respect of Eligible Income of Eligible Assessee
4 Rate of Tax @ 10% on Eligible Income of Eligible Assessee

Plus Surcharge and Cess, as may be applicable on such Tax.

5. Exercise of Option (a)    In the prescribed manner (Rule 5G and Form 3CFA);

(b)    on or before the due date specified u/s 139(1) for furnishing the return of income for the relevant previous year.

6 Restrictions Where the Eligible Assessee opts out of the Special Provision after having exercised the option for any previous assessment year, the Assessee shall not be eligible to claim the benefits of Section 115BBF for five subsequent Assessment Years after the Assessment Year in which the assessee opted out.
7 Definitions “lump sum” includes an advance payment on account of such royalties which is not returnable.

“invention” means a new product or process involving an inventive step and capable of industrial application. (Section 2(1)(j) of Patents Act, 1970).

“patent” means a patent for any invention granted under the Patents Act, 1970 (Section 2(1)(m) of Patents Act, 1970)

“patented article” and “patented process” means respectively an article or process in respect of which a patent is in force. (Section 2(1)(o) of Patents Act, 1970)

“true and first inventor” does not include either the first importer of an invention into India or a person to whom an invention is first communicated from outside India. (Section 2(1)(y) of Patents Act, 1970)

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