With the intent to ensure parity with the global tax regime and in due regard of guidelines issued by the OECD’s BEPS (Base Erosion Profit Shifting) Project, it is proposed to provide a concessional tax regime for eligible assesses engaged in patents and patented products.
In this context, it is proposed that in case of eligible assessee earning royalty income in respect of patents developed and registered in India, the same shall be taxed at the rate of 10% (plus surcharge and cess) on the gross amount of royalty.
It is further proposed that no expenditure or allowance in respect of such royalty income shall be allowed under the Act.
Eligible assessee means a person resident in India, who is first and true inventor of the invention and a patentee, whose patent is registered as per Patents Act, 1970.
Royalty income shall include any consideration received for –
– Transfer of rights of a patent, or
– Imparting information concerning working of, or the use of a patent, or
– Use of any patent, or
– Rendering any services in connection with clauses (i) to (iii).
However without serious improvements in the Patent Registration laws, there is minimal incentive for any person to register and receive IP incomes from India.
These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years.