Deduction in respect of royalty on patents
[Section-152 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 152(1) of Income Tax Act 2025
152(1) An assessee, being an individual, who is––
- (a) a resident in India;
- (b) a patentee;
- (c) in receipt of income by way of royalty in respect of a patent registered on or after the 1st April, 2003 under the Patents Act, 1970; and.
- (d) having gross total income for the tax year which includes royalty,
shall be allowed a deduction from such income computed in the manner specified in sub-sections (2) to (6).
Section 152(2) of Income Tax Act 2025
152(2) The deduction under this section shall be equal to the whole of such income referred to in sub-section (1) or three lakh rupees, whichever is less.
Section 152(3) of Income Tax Act 2025
152(3) Where a compulsory licence is granted in respect of any patent under the Patents Act, 1970, the income by way of royalty for the purpose of allowing deduction under this section shall not exceed the amount of royalty under the terms and conditions of a licence settled by the Controller under that Act.
Section 152(4) of Income Tax Act 2025
152(4) In respect of any income earned from any source outside India, so much of the income, shall be taken into account for the purpose of this section as is brought into India by, or on behalf of, the assessee in convertible foreign exchange within six months from the end of the tax year in which such income is earned or within such further period as the competent authority referred to in section 151(8)(c) may allow in this behalf.
Section 152(5) of Income Tax Act 2025
152(5) No deduction under this section shall be allowed unless the assessee furnishes a certificate in the prescribed form, duly signed by the authority as prescribed, along with the return of income setting forth such particulars, as prescribed.
Section 152(6) of Income Tax Act 2025
152(6) No deduction under this section shall be allowed in respect of any income earned from any source outside India, unless the assessee furnishes a certificate in such form, from the authority or authorities, as prescribed, along with the return of income.
Section 152(7) of Income Tax Act 2025
152(7) In this section,––
- (a) “Controller” means the authority as defined in section 2(1)(b) of the Patents Act, 1970;
- (b) “lump sum” includes a non-refundable advance payment for royalties;
- (c) “patent” means any patent granted, including a patent of addition, under the Patents Act, 1970;
- (d) “patentee” means the true and first inventor recorded as the patentee under the Patents Act, 1970, including joint patentees recorded as such true and first inventors;
- (e) “patent of addition” shall have the same meaning as assigned to it in section 2(1)(q) of the Patents Act, 1970;
- (f) “patented article” and “patented process” shall have the same meanings as assigned to them in section 2(1)(o) of the Patents Act, 1970;
- (g) “royalty” in respect of a patent, means consideration for—
- (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent; or
- (ii) the imparting of any information concerning the working of, or the use of, a patent; or
- (iii) the use of any patent; or
- (iv) the rendering of any services in connection with the activities referred to in sub-clauses (i) to (iii), but does not include any consideration,––
- (A) which would be the income of the recipient chargeable under the head “Capital gains”; or
- (B) for sale of product manufactured with the use of patented process or of the patented article for commercial use; and
- (h) “true and first inventor” shall have the same meaning as assigned to it in section 2(1)(y) of the Patents Act, 1970.
FAQs on Section 152(7) of Income Tax Act 2025
Who is eligible to claim deduction under Section 152?
An individual who is a resident in India, a patentee, and receives royalty income from a patent registered on or after 1st April 2003, provided such royalty is included in their gross total income.
What is the amount of deduction allowed under Section 152?
The deduction is the lower of the actual royalty income or ₹3,00,000.
Is the deduction available if the patent is registered before 1st April 2003?
No, the patent must be registered on or after 1st April 2003 under the Patents Act, 1970.
Can non-residents claim this deduction?
No, only individuals who are residents in India are eligible.
Is the deduction applicable to all forms of royalty?
No, only royalty as defined in Section 152(7)(g) related to patents is eligible. It excludes capital gains and sale proceeds of patented articles or products.
What if a compulsory licence is granted for the patent?
The royalty amount considered for deduction will be limited to the amount fixed by the Controller under the Patents Act.
Is the deduction available for royalty earned from foreign sources?
Yes, but only the amount brought into India in convertible foreign exchange within six months from the end of the tax year (or a further period allowed) qualifies for deduction.
What is the time limit for repatriation of foreign royalty income to claim deduction?
The income must be brought into India within six months from the end of the tax year or within an extended time allowed by the competent authority.
What documentation is required to claim this deduction?
A certificate in the prescribed form, signed by the prescribed authority, must be furnished along with the return of income.
Is a separate certificate required for foreign royalty income?
Yes, for foreign income, an additional certificate from the prescribed authority or authorities must also be submitted with the return.
Can joint patentees claim deduction under Section 152?
Yes, joint patentees recorded as true and first inventors are also eligible.
Is the deduction applicable if the royalty income is received as a lump sum?
Yes, lump sum payments, including non-refundable advances for royalty, are included under the definition of royalty for deduction purposes.
What does ‘royalty’ mean for the purposes of this section?
Royalty includes payments for transfer or licensing of patent rights, sharing of technical information, or services connected to use of the patent, excluding capital gains and product sale income.
What is meant by ‘true and first inventor’ under this section?
It refers to the person recorded as such under section 2(1)(y) of the Patents Act, 1970, including joint patentees.
Is deduction allowed if the patent is not registered in India?
No, the patent must be registered under the Patents Act, 1970, which applies to Indian patents.
What happens if the prescribed certificate is not submitted?
No deduction will be allowed under this section if the required certificate(s) are not furnished with the return.
Are services related to patent use included in royalty for deduction?
Yes, services related to transfer, use, or working of a patent are covered under the definition of royalty.
Does sale of patented products qualify for deduction under Section 152?
No, income from sale of patented articles or products does not qualify as royalty and hence is not eligible for deduction.
Can an assessee claim this deduction every year?
Yes, as long as all eligibility conditions are met in each tax year, the deduction can be claimed annually.
Is deduction allowed for a patent of addition?
Yes, patents of addition under the Patents Act, 1970 are also eligible.
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