Section 115BBF of Income Tax Act "Tax on income from patent"
115BBF. (1) Where the total income of an eligible
assessee includes any income by way of royalty in respect of
a patent developed and registered in India, the income-tax
payable shall be the aggregate of-
(a) the amount of income-tax calculated on the income by way
of royalty in respect of the patent at the rate of ten per
cent; and
(b) the amount of income-tax with which the assessee would
have been chargeable had his total income been reduced by
the income referred to in clause (a).
(2) Notwithstanding anything contained in this Act, no
deduction in respect of any expenditure or allowance shall
be allowed to the eligible assessee under any provision of
this Act in computing his income referred to in clause (a)
of sub-section (1).
(3) The eligible assessee may exercise the option for
taxation of income by way of royalty in respect of a patent
developed and registered in India in accordance with the
provisions of this section, in the prescribed manner, on or
before the due date specified under sub-section (1) of
section 139 for furnishing the return of income for the
relevant previous year.
(4) Where an eligible assessee opts for taxation of income
by way of royalty in respect of a patent developed and
registered in India for any previous year in accordance with
the provisions of this section and the assessee offers the
income for taxation for any of the five assessment years
relevant to the previous year succeeding the previous year
not in accordance with the provisions of sub-section (1),
then, the assessee shall not be eligible to claim the
benefit of the provisions of this section for five
assessment years subsequent to the assessment year relevant
to the previous year in which such income has not been
offered to tax in accordance with the provisions of
sub-section (1).
Explanation.-For the purposes of this section,-
(a) "developed" means at least seventy-five per cent of the
expenditure incurred in India by the eligible assessee for
any invention in respect of which patent is granted under
the Patents Act, 1970 (39 of 1970) (herein referred to as
the Patents Act);
(b) "eligible assessee" means a person resident in India and
who is a patentee;
(c) "invention" shall have the meaning assigned to it in
clause (j) of sub-section (1) of section 2 of the Patents
Act;
(d) "lump sum" includes an advance payment on account of
such royalties which is not returnable;
(e) "patent" shall have the meaning assigned to it in clause
(m) of sub-section (1) of section 2 of the Patents Act;
(f) "patentee" means the person, being the true and first
inventor of the invention, whose name is entered on the
patent register as the patentee, in accordance with the
Patents Act, and includes every such person, being the true
and first inventor of the invention, where more than one
person is registered as patentee under that Act in respect
of that patent;
(g) "patented article" and "patented process" shall have the
meanings respectively assigned to them in clause (o) of
sub-section (1) of section 2 of the Patents Act;
(h) "royalty", in respect of a patent, means consideration
(including any lump sum consideration but excluding any
consideration which would be the income of the recipient
chargeable under the head "Capital gains" or consideration
for sale of product manufactured with the use of patented
process or the patented article for commercial use) for the-
(i) transfer of all or any rights (including the granting of
a licence) 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);
(i) "true and first inventor" shall have the meaning
assigned to it in clause (y) of sub-section (1) of section 2
of the Patents Act.