[Commons-Law] Patents and Tax Deductions

[Mrinalini Kochupillai]

The Central Board of Direct Taxes (CBDT) has ruled that the Controller
General of Patents, Designs and Trade Marks would be the specified
authority for certifying the claims made by a resident individual
seeking tax deduction on royalty income earned from use of patents
registered in India. A new section 80RRB was inserted in the Income Tax
Act, 1961 through the Finance Act 2003 that provided tax breaks on
royalty income earned from patents.

A deduction equivalent to the royalty income received or Rs. 3,00,000,
whichever is less, is allowed as deduction to an individual who is
registered under the Patents Act as the true and first inventor in
respect of an invention.

Even a co-owner of a patent can opt for the deduction. The CBDT has also
prescribed the format of the form (FORM 10CCE) that would have to be
annexed with the return of income for claiming the deduction.