Your manuscript is ready, and you wish to publish it. Writers need to arm themselves with information about royalty payment to Indian authors. This information will aid you in assessing whether the royalty payments for books offered are fair compensation. In this blog, we will cover the crucial areas of royalty calculations, tax deductions, copyright retention, and claiming royalty income from abroad.
How Are Royalty Payments Calculated for Indian Authors?
Royalty payments for authors generally range between 5% and 10% in conventional publishing. In self-publishing, royalty payments for books could be as high as 50%, ranging between 10% and 50%. This said, how are book royalty payments calculated for an Indian author? What factors will influence what royalty an Indian author receives? It is vital for writers to know these criteria so they can negotiate an agreement between the author and the publisher for the highest royalty. Here are some standard methods used:
- Net Sales Revenue Method: The book royalty rate is calculated as a percentage of net sales generated by the sale of your book. Expenses like printing, distribution, and marketing charges are deducted from the total revenue, and the royalty is calculated based on the net sales revenue. Total Sales – Expenses = Net Sales Revenue
- Retail Price Method: In this method, the author is paid a percentage of the book’s retail price. The royalty rates are in the range of 5-10%. The only drawback is that if a discount is offered on the MRP of the book, the book royalty payment is also lower depending on the discount offered. The royalty payment is also a percentage of the book’s retail price. MRP – %Discount Offered= Retail Price
- MRP Method: When publishing a book with a self-publishing company, the standard process for calculating royalty payment is on the Book’s MRP unless otherwise agreed upon. Book Royalty = MRP – printing and related costs
- Advance Against Royalties: Authors may receive an advance payment, an upfront payment against future book royalties. The author receives royalty payments once the book’s sales cover the advance.
Some publishing companies offer royalty payment calculation tools that enable the author to calculate royalties online. This helps the author judge what earnings they can expect when a certain number of books are sold.
What Tax Deductions Are Available for Royalty Income in India?
Authors need to know that royalty income is taxable in India under the Income Tax Act 1961. However, certain exemptions can reduce the author’s tax liability. Some key tax deductions available for tax on royalty payments to authors include:
- Section 80QQB: Under this section, Indian authors can avail of deductions on royalty earned through literary, artistic, or scientific works of up to ₹3,00,000 from their royalty income. To take advantage of this offering, the author must be an Indian resident, and the royalty must be received in India.
- Expenses Incurred for Earning Royalty: Indian authors can also claim royalty income deductions for expenses incurred in connection with the book, such as travel expenses for book promotions, printing, and marketing expenses.
Can Authors Retain the Copyright of Their Books While Receiving Royalties?
Authors can retain the copyright of their book while receiving royalties unless the agreement signed with the publisher stipulates otherwise. Copyright enables the author to receive benefits of rights for extended distribution to other nations and adaptations, like for OTT, etc. This also will ensure you have a voice in any reproduction of your work.
These clauses can be added to the contract, ensuring you have full rights over your work without affecting the royalties received.
Publishing contracts may vary, but here are some common scenarios:
- Exclusive License: The author grants the publisher an exclusive license to publish and distribute the book. The author retains the copyright but allows the publisher exclusive rights to market and sell the book.
- Non-Exclusive License: The author grants the publisher a non-exclusive license to publish and distribute the book. This allows the author to license the work to multiple publishers.
What Is the Process for Claiming Royalty Income Earned Outside India?
An author earning royalty income from book sales outside of India needs to follow these steps:
- Foreign Currency Remittance: The royalty income must be remitted to India in foreign currency. The author can receive the money through international wire transfers, PayPal, or other payment platforms.
- Foreign Income Reporting: Foreign royalty income must be reported in the income tax filing under the heading “Income from Other Sources.” Since royalty income is taxable in India, authors must disclose this income when filing tax returns.
- Double Taxation Avoidance Agreements (DTAA): India has DTAA with several countries to avoid double income taxation. Authors can avail themselves of tax relief under DTAA if they have paid taxes on royalty income in a foreign country.
- Foreign Tax Credit: If royalty income has been taxed abroad, the author can claim a foreign tax credit while filing income tax returns. Thus reducing tax liability.
For an author looking to maximise their earnings and reduce tax liabilities, it is essential to understand the fine print in royalty payments for Indian authors. Being informed also means you can negotiate fair royalties and draw up agreements securing your rights as an Indian author. By staying informed about royalty calculations, tax deductions, copyright retention, and foreign income reporting, authors can confidently navigate the world of royalty payments and ensure they receive fair compensation for their creative works.