The Income Tax Department has issued detailed Frequently Asked Questions (FAQs) on Form 65, providing clarity on the concessional tax regime available for royalty income earned from patents developed and registered in India.
Form 65 has been introduced under Section 194(1) (Table: Sl. No. 2) of the Income-tax Act, 2025, replacing the earlier framework under Section 115BBF of the Income-tax Act, 1961. The move is aimed at encouraging innovation, indigenous research and patent development in India.
What is Form 65?
According to the FAQs, Form 65 is an application form that enables eligible resident taxpayers to opt for a concessional tax rate of 10% on royalty income arising from patents developed and registered in India.
The benefit applies specifically to royalty income earned from qualifying patents and is part of India's "Patent Box Regime", designed to incentivise innovation and intellectual property creation within the country.
Major Benefits of Filing Form 65
The FAQs highlight several advantages available to eligible taxpayers who opt for the regime:
- Royalty income gets taxed at a flat concessional rate of 10% plus surcharge and cess.
- Taxpayers can avail benefits under the Patent Box Regime.
- The scheme promotes indigenous research and development activities.
- The concessional regime applies to gross royalty income.
However, taxpayers opting for the scheme cannot claim deductions or allowances against such royalty income.
Who Can File Form 65?
The Income Tax Department clarified that any resident taxpayer including individuals, firms or companies, earning royalty income from patents developed and registered in India, can file Form 65 to claim the concessional tax rate.
Non-residents are not eligible for the benefit.
Eligibility Conditions for Patents
The FAQs specify strict conditions for patents to qualify under the regime:
- The patent must be registered under the Indian Patents Act, 1970.
- At least 75% of the total expenditure for the invention must have been incurred in India.
- Only the "true and first inventor" registered as patentee can claim the benefit.
Where multiple inventors are registered, all qualifying "true and first inventors" may avail the benefit.
Form 65 Filing Deadline
Form 65 must be filed on or before the due date for furnishing the return of income for the relevant tax year under Section 263(1) of the Income Tax Act, 2025.
Documents Required for Filing
The department has listed the following documents for filing Form 65:
- Self-certified patent grant certificate
- PAN card and Aadhaar card
- Audited annual accounts
- Bank statements
- Form 26AS for TDS reconciliation
Online Filing Process Explained
The FAQs clarify that Form 65 can only be filed electronically through the Income Tax e-Filing portal. The filing process includes:
- Logging into the e-Filing portal
- Navigating to "Income Tax Forms"
- Selecting Form 65 and relevant tax year
- Entering patent and royalty details
- Electronically verifying the form using DSC or EVC
Offline filing is not permitted.
Important 5-Year Lock-In Rule
One of the key highlights of the FAQs is the continuation requirement attached to the concessional regime.
Once a taxpayer opts for the regime through Form 65, they are generally required to continue under it for the next five tax years. If they opt out during this period, they become ineligible to re-enter the regime for the following five years.
The department further clarified that the earlier lock-in period under the Income-tax Act, 1961, will continue under the new Section 194 regime of the Income-tax Act, 2025.
No Revision or Withdrawal Allowed
The FAQs also state that once Form 65 is validly filed for a tax year, it cannot be revised or withdrawn for that year.
The clarification is expected to help startups, innovators, technology companies and patent holders better understand the concessional taxation framework introduced under the new Income-tax Act, 2025.
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