NRI royalty income from India: taxed under Section 115A at 20%, but the treaty usually cuts it.

If you are a non-resident receiving royalties from India, a novelist paid by an Indian publisher, a developer licensing software to an Indian company, an inventor licensing a patent, a brand owner licensing a trademark or a franchise, the starting question is whether India can tax that income. Usually it can, and the rule that decides it is about where the right is used, not where you live.

Royalty paid by an Indian payer for the use of a copyright, patent, trademark, design, secret formula or process, or software is treated as income arising in India, so it is taxable here even though you are abroad. The one important exception runs the other way: if the right is used for a business you carry on outside India, or to earn income from a source outside India, the royalty is not Indian-source and India does not tax it. So a patent an Indian company uses in its Indian factory produces Indian-taxable royalty; the same patent licensed for use in your business abroad does not.

Assuming the right is used in India, the royalty is taxable, and the two things that then matter are the rate, where the treaty does real work, and whether you even have to file a return, where a specific rule can save you the trouble. Take them in turn.

The domestic rate is the headline number, and it went up sharply. Under Section 115A, royalty paid to a non-resident with no permanent establishment in India is taxed at 20% plus surcharge and cess, on the gross amount with no deductions. That 20% is recent: it was doubled from 10% with effect from the 2024-25 assessment year, which caught a lot of licensors used to the old rate.

The relief is the tax treaty. Most of India's treaties have a royalty article that caps the rate India can charge, commonly at 10% or 15%, and under the more-beneficial rule you are entitled to whichever is lower, the treaty rate or the domestic 20%. For a resident of a country whose treaty caps royalty at 10%, that halves the Indian tax, from 20% to 10%. This is the real difference between a royalty and some other kinds of income, where the treaty gives no rate cap: for royalty, the treaty genuinely lowers the number.

But the lower rate is not automatic. You only get it if you have claimed the treaty properly, which means paperwork in the payer's hands before they pay you. Miss that, and the payer withholds at the full 20%, and you are left recovering the difference by filing, which is slower and ties up your money.

Two mechanics decide how this actually plays out: how the tax is withheld, and whether you have a return to file at all.

On withholding, because you are a non-resident the Indian payer deducts tax under Section 195 on the royalty, at the 20% Section 115A rate or the lower treaty rate if you have given them your Tax Residency Certificate and Form 10F. Section 195 has no minimum threshold, so it bites on any amount. If the payer withheld at 20% because your paperwork was not in on time, the excess over the treaty rate is refundable, but only through a return.

On filing, there is a genuine shortcut, with a catch. Section 115A(5) says that if your only Indian income is royalty or fees for technical services taxed under Section 115A, and tax has been withheld at the Section 115A rate, you do not have to file an Indian return at all. That is a real simplification for a non-resident whose sole Indian income is a licensed royalty. The catch is that it assumes withholding at the full Section 115A rate; if you want the lower treaty rate, the tax at source is not at that rate, and you generally file to claim the treaty or the refund. So you often choose between the no-filing shortcut at 20% and filing to secure the 10% treaty rate, and for a meaningful royalty the second is usually worth the return.

The move that saves you money is the same one as for any non-resident income taxed on a gross basis: get the treaty rate applied at source rather than reclaiming it later. Give the Indian payer your Tax Residency Certificate and Form 10F, and a no-permanent-establishment declaration where the arrangement calls for one, before the royalty is paid, so the withholding is at the treaty rate from the first payment. For a large or recurring royalty, a lower-deduction certificate can pin the rate even more precisely.

If tax was over-withheld anyway, you reclaim it by filing an Indian return for the year, reporting the royalty, applying the treaty rate, and claiming the difference from the Section 195 TDS as a refund. This is also the return that Section 115A(5) would otherwise have let you skip, which is why the filing and the treaty saving are really one decision.

Then the money moves out cleanly. Royalty is current income, not a capital receipt, so it is freely repatriable from your NRO account net of tax, with a CA's certificate in Form 15CA and 15CB, now Forms 145 and 146 under the Income-tax Act 2025; the USD 1 million yearly limit that applies to capital items does not restrict a current-income royalty. Keep the licensing or publishing agreement and the TDS certificate, which prove both the income and the tax already paid, and both the return and the remittance follow easily.