Jigar M. Patel
International Tax Attorney
As per the executive instructions of the Central Board of Direct Taxes (CBDT), certain adhoc deductions for expenses are available out of specified incomes, while computing the taxable income under the Income-tax Act.
Deductions out of Honorarium for Writings
As per instructions of the CBDT issued in response to representation by the Authors Guild of India, a special deduction is eligible to Indian authors in respect of honorarium and royalty income received by them for their writings. Keeping in view the fact that it is not practical for authors to keep documentary evidence in regard to expenses incurred by them for their writings, it has been prescribed that where the total income out of such honorarium and royalty income is less than Rs.25,000 and where detailed accounts have not been maintained, an adhoc deduction at the rate of 25% of such income or Rs.5,000, whichever is less, will be allowed for the purpose of computing the taxable income under this head.
It has also been clarified that the writings for the purpose of this deduction will include books, articles and other publications. It has been further clarified that even where the royalty income is receivable year after year, if the taxpayer so desires, he can claim the benefit of total deduction in respect of the royalty receivable during the year of publication itself.
It needs to be borne in mind that for the purposes of claiming the above referred adhoc deduction, the author need not produce any documentary evidence. However, if the expenditure to be claimed by way of deduction exceeds the aforesaid limit, necessary evidence in regard to the same should be maintained.
It should also be borne in mind that where the total income out of such writings exceeds Rs.2,50,000 in a year, the maintenance of books of accounts under Section 44AA(2) of the Income-tax Act would also be necessary.
Deduction for Specified Royalty Income of Authors
As per the provisions of Section 80QQB, a special deduction of upto Rs.3,00,000 is available, in respect of specified royalty income earned by an author, who is an individual resident in India.
Such specified royalty income should be received in respect of any book authored by the individual, which is a work of literary, artistic or scientific nature. However, for the above purposes, a book shall not include brochures, commentaries, diaries, guides, journals, magazines, newspapers, pamphlets, text-books for school, tracts and other publications of similar nature by whatever name called.
Royalty income, for purposes of deduction under Section 80QQB, shall include any lump sum consideration for the assignment of grant of any interest by the author in the copyright of any book, or royalty or copyright fees, whether receivable in lump sum or otherwise in respect of any book.
It has been stipulated in this regard that where the income by way of royalty or the copyright fees is not a lump sum consideration, the same shall be allowed to the extent of 15% of the value of books sold during the relevant year.
It is also prescribed that where deduction under Section 80QQB for any year has been claimed and allowed, no deduction in respect of such income shall be allowed under any other provision of the Act in any Assessment Year.
