Section 80RRB Patent Royalty Deduction: Section 152 of the Income-tax Act, 2025

A resident individual who is the true and first inventor and registered patentee may qualify for a deduction of up to Rs. 3,00,000 on eligible patent royalty. For tax years beginning on or after 1 April 2026, the governing provision is section 152 of the Income-tax Act, 2025; for earlier assessment years, the corresponding provision was section 80RRB of the Income-tax Act, 1961.

Current legal position: Section 80RRB was carried forward as section 152, not abolished. The basic Rs. 3 lakh limit and eligibility for patents registered on or after 1 April 2003 continue. Filing requirements and form numbers depend on the applicable tax year.

Who can claim the deduction?

Under section 152(1), the claimant must be an individual resident in India, a patentee, and receive royalty relating to a patent registered under the Patents Act, 1970 on or after 1 April 2003. The royalty must be included in the individual's gross total income. A company or a person who merely purchases patent rights without qualifying as a true and first inventor does not meet the statutory definition of patentee for this deduction.

Amount of deduction and examples

Section 152(2) permits the lower of eligible patent royalty income and Rs. 3,00,000. For example, eligible royalty of Rs. 2,40,000 permits a deduction up to Rs. 2,40,000; eligible royalty of Rs. 5,00,000 is capped at Rs. 3,00,000. The deduction cannot exceed qualifying income and remains subject to all statutory conditions and the applicable tax regime.

Meaning of royalty and exclusions

For this provision, royalty includes lump-sum consideration (including non-returnable royalty advances) received for licensing or transferring rights in a patent, providing information about its working or use, use of the patent, or related services. It excludes amounts chargeable as capital gains and proceeds from the commercial sale of patented articles or products made using a patented process. Ordinary sales turnover is therefore not automatically patent royalty.

Compulsory licences

Under section 152(3), where a compulsory licence has been granted under the Patents Act, 1970, eligible royalty cannot exceed the amount fixed under the licence terms settled by the Controller. The Controller is defined by section 2(1)(b) of the Patents Act.

Royalty earned outside India

Under section 152(4), foreign-source royalty is counted only to the extent brought into India in convertible foreign exchange within six months after the end of the relevant tax year, or within a longer period permitted by the competent authority. The competent authority is the Reserve Bank of India or another authority authorised to regulate foreign exchange payments. Keep bank remittance records and the prescribed supporting certificate.

Certificates and filing requirements

Section 152(5) and (6) prescribe certificates for patent royalty and foreign-source income, respectively. Under the Income-tax Rules, 2026, Form 37 is the certificate associated with section 152(5). For claims under the 1961 Act, the relevant certificate was Form 10CCE under rule 19AD; foreign-source certification under the earlier rules involved Form 10H. Use the form, electronic filing method and due date applicable to the tax year concerned.

Maintain patent registration details, proof that the claimant is the true and first inventor, royalty agreements, payer statements, certificates and evidence of foreign remittances where relevant. A deduction already allowed on the same royalty cannot be claimed again under another provision or in another year, as provided by section 152(7).

Important statutory definitions

Patent: A patent, including a patent of addition, granted under the Patents Act, 1970.
Patentee: The true and first inventor whose name is entered in the patent register as patentee, including each qualifying inventor where several are registered.
Patent of addition: A patent for an improvement or modification, as defined in section 2(1)(q) of the Patents Act.
Patented article or process: Expressions defined in section 2(1)(o) of the Patents Act.
True and first inventor: Has the meaning assigned by section 2(1)(y) of the Patents Act.

Legislative background

Section 80RRB was inserted by the Finance Act, 2003, with effect from 1 April 2004. It applied to qualifying royalty from patents registered on or after 1 April 2003. The Income-tax Act, 2025, effective from 1 April 2026, reorganised the provision as section 152. The older law remains relevant for tax years governed by the 1961 Act and related proceedings.

Official references

Frequently asked questions

What is the maximum patent royalty deduction?

The lower of qualifying royalty income or Rs. 3,00,000.

Can a joint inventor claim it?

Yes, a joint inventor may qualify if registered as patentee and meeting the other statutory conditions.

Does the deduction cover sales of patented products?

No. Consideration for commercial sales of patented articles or products manufactured using patented processes is excluded from the statutory meaning of royalty.

What replaces section 80RRB from April 2026?

Section 152 of the Income-tax Act, 2025.

Updated 25 October 2026. This guide explains statutory provisions and does not replace advice based on the facts of a particular tax return.