Royalty or License Fees

This query is : Resolved

Dipen (Querist)
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14 July 2020 Hi,

In case of copyrighted software product , distributors/resellers pay a fixed amount/fixed % to the copyright owner for every sale. In this case fixed amount/fixed % on every sale will be in nature of royalty or sales? Also there can be multiple distributors for same copyrighted software product.

Also if royalty/sales can this fall under presumptive scheme?

Regards,

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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14 July 2020 It will be in the nature of royalty. It will not fall under presumptive scheme.

Dipen

Dipen (Querist)
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14 July 2020 Thanks for the opinion

What if copyright owner sells directly to end users ? Then it will be license fees? How will that be taxed?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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14 July 2020 Yes, if software is sold directly it will be treated as sale.

Dipen

Dipen (Querist)
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14 July 2020 Will the same apply if same is sold through a distributor or reseller? i.e Copyright owner to distributor/reseller and reseller to end user. Will this be sales?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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14 July 2020 Yes this will be sales.

Spurto Consultancy Services

Spurto Consultancy Services (Expert)
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14 July 2020 If you are directly selling to user and charging the licence fees then you can show it as a sale and report u/s 44AD.
However if you are receiving royalty/commission from your distributor on every sale then it cannot be presumptive income. Books of Accounts have to be maintained.

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