Income Tax Act, 2025
Section 5: Ins. by Act 28 of 2016, s. 54 (w.e.f. 12017).
5. Ins. by Act 28 of 2016, s. 54 (w.e.f. 12017).
477
(4) Where an eligible assessee opts for taxation of income by way of royalty in respect of a patent
developed and registered in India for any previous year in accordance with the provisions of this section
and the assessee offers the income for taxation for any of the five assessment years relevant to the
previous year succeeding the previous year not in accordance with the provisions of sub-section (1), then,
the assessee shall not be eligible to claim the benefit of the provisions of this section for five assessment
years subsequent to the assessment year relevant to the previous year in which such income has not been
offered to tax in accordance with the provisions of sub-section (1).
Explanation.—For the purposes of this section,—
(a) “developed” means at least seventy-five per cent. of the expenditure incurred in India by the
eligible assessee for any invention in respect of which a patent is granted under the Patents Act, 1970
(herein referred to as the Patents Act);
(b) “eligibleassessee” means a person resident in India and who is a patentee;
(c) “invention” shall have the meaning assigned to it in clause (j) of sub-section (1) of section 2
of the Patents Act;
(d) “lump sum” includes an advance payment on account of such royalties which is not
returnable;
(e) “patent” shall have the meaning assigned to it in clause (m) of sub-section (1) of section 2 of
the Patents Act;
(f) “patentee” means the person, being the true and first inventor of the invention, whose name is
entered on the patent register as the patentee, in accordance with the Patents Act, and includes every
such person, being the true and first inventor of the invention, where more than one person is
registered as patentee under that Act in respect of that patent;
(g) “patented article” and “patented process” shall have the meanings respectively assigned to
them in clause (o) of sub-section (1) of section 2 of the Patents Act;
(h) “royalty”, in respect of a patent, means consideration (including any lump sum consideration
but excluding any consideration which would be the income of the recipient chargeable under the
head “Capital gains” or consideration for sale of product manufactured with the use of patented
process or the patented article for commercial use) for the—
(i) transfer of all or any rights (including the granting of a licence) in respect of a patent; or
(ii) imparting of any information concerning the working of, or the use of, a patent; or
(iii) use of any patent; or
(iv) rendering of any services in connection with the activities referred to in sub-clauses (i)
to (iii);
(i) “true and first inventor” shall have the meaning assigned to it in clause (y) of sub-section (1)
of section 2 of the Patents Act.]
478
1[115BBG. Tax on income from transfer of carbon credits.—(1) Where the total income of an
assessee includes any income by way of transfer of carbon credits, the income-tax payable shall be the
aggregate of—
(a) the amount of income-tax calculated on the income by way of transfer of carbon credits, at
the rate of ten per cent; and
(b) the amount of income-tax with which the assessee would have been chargeable had his total
income been reduced by the amount of income referred to in clause (a).
(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or
allowance shall be allowed to the assessee under any provision of this Act in computing his income
referred to in clause (a) of sub-section (1).
Explanation.—For the purposes of this section, “carbon credit” in respect of one unit shall mean
reduction of one tonne of carbon dioxide emissions or emissions of its equivalent gases which is validated
by the United Nations Framework on Climate Change and which can be traded in market at its prevailing
market price.]
2[CHAPTER XII-A
SPECIAL PROVISIONS RELATING TO CERTAIN INCOMES OF NON-RESIDENTS
Where an eligible assessee opts for taxation of income by way of royalty in respect of a patent
developed and registered in India for any previous year in accordance with the provisions of this section
and the assessee offers the income for taxation for any of the five assessment years relevant to the
previous year succeeding the previous year not in accordance with the provisions of sub-section
“developed” means at least seventy-five per cent. of the expenditure incurred in India by the
eligible assessee for any invention in respect of which a patent is granted under the Patents Act, 1970
(herein referred to as the Patents Act);
“eligibleassessee” means a person resident in India and who is a patentee;
“invention” shall have the meaning assigned to it in clause
of sub-section
of section 2
of the Patents Act;
“lump sum” includes an advance payment on account of such royalties which is not
returnable;
“patent” shall have the meaning assigned to it in clause
of sub-section
of section 2 of
the Patents Act;
“patentee” means the person, being the true and first inventor of the invention, whose name is
entered on the patent register as the patentee, in accordance with the Patents Act, and includes every
such person, being the true and first inventor of the invention, where more than one person is
registered as patentee under that Act in respect of that patent;
“patented article” and “patented process” shall have the meanings respectively assigned to
them in clause
of sub-section
of section 2 of the Patents Act;
“royalty”, in respect of a patent, means consideration (including any lump sum consideration
but excluding any consideration which would be the income of the recipient chargeable under the
head “Capital gains” or consideration for sale of product manufactured with the use of patented
process or the patented article for commercial use) for the—
transfer of all or any rights (including the granting of a licence) in respect of a patent; or
imparting of any information concerning the working of, or the use of, a patent; or
use of any patent; or
rendering of any services in connection with the activities referred to in sub-clauses
to
“true and first inventor” shall have the meaning assigned to it in clause
of sub-section
of section 2 of the Patents Act.]
478
1[115BBG. Tax on income from transfer of carbon credits.—
Where the total income of an
assessee includes any income by way of transfer of carbon credits, the income-tax payable shall be the
aggregate of—
the amount of income-tax calculated on the income by way of transfer of carbon credits, at
the rate of ten per cent; and
the amount of income-tax with which the assessee would have been chargeable had his total
income been reduced by the amount of income referred to in clause
Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or
allowance shall be allowed to the assessee under any provision of this Act in computing his income
referred to in clause
of sub-section