Q I am an author of books on scientific research. Will the royalty received by me from publishers fully-exempt from tax? If not fully taxed, to what extent can I claim deduction on the royalty?
Harika Rao Via Mail
A) Section 80QQB allows deduction for any income in the nature of royalty or copyright fee of authors of certain books other than textbooks for assignment or grant of any interest in the copyright of any book. The deduction allowable in respect of royalty or copyright fees is Rs 3 lakh or royalty received, whichever is lower, if the same is by way of lump sum payment. For calculating, the deduction under Section 80QQB, the amount of gross eligible income (i.e., before allowing expenses pertaining to such income) should not exceed 15 per cent of the value of the books sold during the previous year. This condition is, however, not applicable where the royalty or copyright fees, is receivable in lump sum consideration in lieu of all rights of the author in the book. Income in respect of any book to qualify for deduction under this section should be a work of literary, artistic or scientific nature. Books for this purpose will not include brochures, dairies, journals, magazines, newspapers, etc.
Q My son is a permanent resident in Australia. He is in highest tax bracket. I was told that India has a tax treaty with Australia. How can he save tax either by investing or by postponing tax liability?
Chetan Via email
A) Since India and Australia are governed by tax-treaty, the income received by your son will be taxed as per the existing tax laws in Australia. The investment of funds, which you are contemplating to make in India, is the post-tax saving funds. The income generated out of funds invested in India will be taxed as per the Indian tax laws. In my opinion, he may not be able to derive any tax benefit in Australia by making investments in India. Further, the income generated in India also shall be liable to tax in Australia as his residential status in Australia shall be that of a resident. Any taxes paid by them on their income in India will also be eligible for set off against the taxes paid in Australia.