All About Form 3CFA Filing Under the Income Tax Act 1961

What is the Rate Offered Under Section 115BBF?

Section 115BBF provides a Concessional Tax Rate on Patent Income of 10% on income earned by way of Patent Royalty Income from a patent developed and registered in India. However, no deduction in respect of any expenditure shall be allowed to the assessee while computing income taxable at the rate of 10%.

Example:

Suppose Mr. A, an eligible resident patentee, earns ₹10 lakh as royalty income from a patent that was developed and registered in India. Subject to fulfillment of the prescribed conditions under Section 115BBF, the royalty income may be taxed at the concessional rate of 10%. However, Mr. A cannot claim deductions for expenses incurred in earning such royalty income while computing the taxable amount.

How to arrive at the total income by way of royalty to offer tax @10%?

Royalty income means any consideration for the:

• Transfer of all or any right in respect of a patent; or
• Imparting any information concerning the working of, or the use of, a patent; or
• Use of a patent; or

Rendering any services concerning the activities referred to above.

Royalty also includes any lump sum consideration (including any advance payment received which is non-refundable) but excludes income in the nature of capital gains or consideration received from the sale of a product manufactured using a patented process or article for commercial use.

Time Limit to Avail the Option of Concessional Tax Rate

Eligible assessee may opt for the concessional rate of taxation by filing Form 3CFA on or before the due date of filing the income tax return. There is no compulsion to pay tax under Section 115BBF, and an assessee may choose to pay tax at the normal income tax rates.

However, if an assessee, after opting for the concessional tax rate, pays tax otherwise than at 10% in any of the next five years, the assessee shall not be eligible to opt for the concessional tax rate for the subsequent five assessment years from the year in which such tax treatment is adopted. In simple words, if an assessee opts for the concessional tax rate, the benefit remains available subject to compliance with the prescribed provisions. If the assessee does not comply with the provisions during any of the next five years, the assessee shall become ineligible to claim the concessional tax benefit for the following five assessment years.

Procedure for Form 3CFA Filing

An eligible assessee can furnish the form by any of the following two ways:

• Electronically through a Digital Signature Certificate (DSC); or
• Electronically through an Electronic Verification Code (EVC), i.e., through an OTP sent to the registered mobile number of the assessee.

The form shall be completed in all respects and must be filed before the due date specified above to avail of the concessional tax rate.

What Details are Required in Form 3CFA?

Very few details are required for Form 3CFA filing to claim the concessional tax rate, such as the basic details of the assessee, including PAN Application, address, and patent-related information, including the patent number, date of grant of patent, and details of the person or persons in whose name the patent is registered. The form may also require details relating to royalty income and expenditure incurred in respect of the eligible patent.

Ebizfiling’s Support for Tax and Regulatory Compliance

Understanding provisions such as Section 115BBF, Patent Royalty Income, and Form 3CFA filing can be challenging for taxpayers. Ebizfiling simplifies complex tax and compliance topics through expert-written guides, practical insights, and regular updates on regulatory changes. Our goal is to help businesses, professionals, and individuals stay informed about income tax requirements and make better compliance decisions.

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