Income Tax Form 65: Option for Taxation of Patent Royalty Income

The Income Tax Department has issued FAQs and guidance on Form 65, which enables eligible resident taxpayers to opt for a concessional tax rate of 10% on royalty income earned from patents developed and registered in India under Section 194(1) of the Income-tax Act, 2025 . The form must be filed electronically on or before the due date for filing the return of income and is generally filed once when opting into the regime. The scheme requires taxpayers to forgo all deductions related to such royalty income and mandates a five-year lock-in period, with ineligibility for five subsequent years upon exit. Only resident taxpayers who are “true and first inventors” and whose patents meet the requirement of at least 75% expenditure incurred in India are eligible. The form captures detailed disclosures relating to patents, income, and expenditure. Failure to file the form within the prescribed timeline may result in taxation at normal rates instead of the concessional regime.

Income Tax Department
Ministry of Finance, Government of India

FAQs on Income Tax Form 65: Form for opting for taxation of income by way of royalty in respect of patent

Form of Application under Section 194(1) (Table: Sl. No. 2) of the Income- tax Act,2025

Q1. What is Form 65 ?

 Ans: Form 65 is an Income tax form used by eligible resident taxpayers to opt for a concessional tax rate of 10% on income earned by way of royalty from a patent developed and registered in India as provided by Section 194(1) (Table: Sl.No. 2) of the Income-Tax Act, 2025.

Q2. What is the purpose of Form 65 ?

Ans: The primary purpose of filing Form 65 is to:

• Claim a lower tax rate: By default, royalty income might be taxed at normal slab Filing this form allows the eligible assessee to be taxed at a special, lower flat rate of 10% (plus surcharge and cess) on the gross amount of the royalty income.
• Opt into the “Patent Box Regime”: This section encourages indigenous research and development by providing tax incentives for patents developed and registered in India.
• Forgo other deductions: A key condition of opting for this concessional rate is that no expenditure or allowance is allowed as a deduction against this royalty income.
• Commit to the regime: Once this option is exercised, the taxpayer must adhere to this taxation method for the next five Tax years; failing to do so makes them ineligible for the regime for the five years following the year of

Q3. Who needs to file Form 65 ?

Ans: Any resident in India (individual, firm, company, etc.) who earns income by way of royalty on a patent developed and registered in India and wishes to benefit from the concessional 10% tax rate must file this Form.

Q4. When should Form 65 be filed?

Ans: 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).

Q5. What are the documents required for filing Form 65 ? Ans:

• Self-certified copy of the Patent grant certificate.
• Proof of identity and address: PAN card and Aadhaar card.
• Audited annual accounts: Particularly if you are a business or association.
• Bank statements: To verify income and expenses.
• Form26AS: To reconcile any tax deducted at source.

Q6. What is the process flow of filing Form 65 ? Ans:

i. Login to the e-Filing Portal: Access the official Income Tax Department website at incometax.gov.in using your user ID (PAN) and password.

ii. Navigate to the Forms Section: Go to the “e-File” menu and select “Income Tax Forms” or “Prepare and Submit Online Form (Other than ITR)”.

iii. Select Form 65 : Choose ” Form 65 ” from the list of available forms and select the relevant Tax Year.

iv. Fill the Form: Provide all required details in the form, which typically include:

a. Full name, address, and PAN/Aadhaar number of the

b. Nature of business or

c. Details of the patent, including number and date of

d. Amount and nature of royalty income earned during the Tax

e. Details of any expenditure incurred on the patent in India

f. Details of total expenditure incurred

v. Submit Electronically: Form 65 is filed

vi. Verify the Form: The final step involves verifying the form using either digital signature or electronic verification code.

Q7. Can Form 65 be filed offline?

Ans: No, Form 65 can only be submitted online through the Income Tax e-Filing portal.

Q8. Can Form 65 be revised or withdrawn?

Ans: No, once FORM 65 is validly filed for a relevant Tax year, it cannot be revised or withdrawn for that year.

Q9. What is the frequency for filing Form 65 ?

Ans: Form 65 is an application form to opt into a specific tax regime under the Income Tax Act, 1961. It is generally filed once when the taxpayer decides to exercise this option.

Q10. Which category of taxpayers are eligible for availing for benefitting from the concessional tax regime?

Ans: The concessional tax treatment is only available to taxpayers who are residents in India. Non-resident individuals or entities are ineligible.

Q11. Is there any lock -in period, once the tax payer opts for the tax regime by filing Form 65 ?

Ans: Once a taxpayer opts for Section 194(1) (Table: Sl.No. 2), it is generally required to continue with this regime for the next five Tax years. If the taxpayer chooses not to be governed by this section in any of those subsequent years, they become ineligible to opt for the regime again for the five Tax years following the year they opted out.

Q12. Does the 5-year “lock-in” reset or carries over to the new Section 194 regime under the Income Tax Act 2025?

Ans: The 5-year “lock-in” carries over to the new Section 194 regime under the Income Tax Act,2025.

Q13. Which patents are eligible for availing for benefitting from the concessional tax regime?

Ans:

i. The patent must be registered under the Indian Patents Act, 1970. “Patent” has the same meaning as assigned to it in section 2(1)(m) of the Patents Act.

ii. The patent must be developed in India. The patent is only considered “developed in India” if at least 75% of the total expenditure for the invention was incurred in India by the eligible assessee.

Q14. Which category of patentees are eligible for claiming benefit under Section 194(1) (Table: Sl.No. 2)?

Ans:

The “true and first inventor” whose name is entered on the patent register, only, is eligible for availing benefit under Section 194(1) (Table: Sl.No. 2) and it includes every such person, being the true and first inventor of the invention, where more than one person is registered as patentee.

“True and first inventor” shall have the same meaning as assigned to it in section 2(1)(y) of the Patents Act.

Guidance Note on Income Tax Form 65: Form for opting for taxation of income by way of royalty in respect of patent

FORM 65 Guidance Note

 Form of Application under Section 1G4(1) (Table: Sl. No. 2) of the Income-tax Act,2025

Form 65 is an Income tax form used by eligible resident taxpayers to opt for a concessional tax rate of 10% on income earned by way of royalty from a patent developed and registered in India as provided by Section 194(1) (Table: Sr.No. 2) of the Income-Tax Act, 2025.

Purpose of Form 65

The primary purpose of filing Form 65 is to:

• Claim a lower tax rate: By default, royalty income might be taxed at normal slab  Filing this form allows the eligible assessee to be taxed at a special, lower flat rate of 10% (plus surcharge and cess) on the gross amount of the royalty income.
• Opt into the “Patent Box Regime”: This section encourages indigenous research and development by providing tax incentives for patents developed and registered in India.
• Forgo other deductions: A key condition of opting for this concessional rate is that no expenditure or allowance is allowed as a deduction against this royalty income.
• Commit to the regime: Once this option is exercised, the taxpayer must adhere to this taxation method for the next five Tax years; failing to do so makes them ineligible for the regime for the five years following the year of default.

Filing Requirements

• Who can file: An eligible resident assessee (individual, HUF, company, ) who has income from royalty in respect of an Indian patent they have developed and registered in India.
• When to file: Form 65 must be furnished on or before the due date for furnishing the return of income under Section 263(1) of the Income-tax Act.
• How to file: The form must be filed electronically, either using a Digital Signature Certificate (DSC) or through an electronic verification code (EVC).
• Information required: The form requires general taxpayer details, specific details of the eligible patent (e.g., patent number, date of grant of patent, description etc.), and details of the royalty income and associated expenditure.

Frequency and Due Date

• Frequency: Form 65 is an application form to opt into a specific tax regime under the Income Tax Act,  It is generally filed once when the taxpayer decides to exercise this option.
• Due Date: The form must be furnished on or before the due date for filing the return of income specified in column C of table provided in section 263 (1) c) for the relevant tax year in which the option is exercised.

Structure of Form 65

The form is divided into the following key parts:

Part –A

• Personal Information: This section captures basic identifying information about the assessee:
  • Full name of the assessee
  • Permanent Account Number (PAN) / Aadhaar Number
  • Address
  • Tax year
  • Residential status

Part –B

• Exercise of Option under Section 1G4(1) (Table: No. 2): This part confirms if the taxpayer is exercising the option to be taxed under Section 194(1) (Table: Sr.No. 2) for the relevant tax year and requires details of:
  • Nature of business
  • Tax year
  • Date of furnishing of the return of income (if already filed)
  • Whether the tax payer opted out of the patent box regime in any of the 5 tax years, succeeding the year in which the option was 1st exercised
• Details of Each Eligible Patent:This requires specific details for each patent from which royalty income is derived:
  • Description of the patent
  • Patent number
  • Date of grant of the patent
  • Whether the patent was granted to a single person or jointly
• Royalty Income and Expenditure Details: This section requires a breakdown of the financial information:
  • Details of royalty income derived from the eligible patent
  • Details of expenditure incurred in India on the eligible patent
  • Whether expenditure incurred for the eligible patent in the given tax year is more than 75% of the total expenditure incurred on the invention of the eligible patent.

Part –C

• Declaration/Verification: The Form concludes with a verification section where the assessee (or an authorized person) declares that the information provided is correct and  The Form must be verified electronically, either by digital signature or electronic verification mode.

Key Points to Note

• Mandatory Filing: To avail the 10% concessional tax rate, an eligible taxpayer must file Form 65 in the prescribed manner.
• No Other Expenditure Allowed: If this concessional tax rate is chosen, no other expenditure or allowance related to that royalty income is permitted as a deduction under the Income Tax Act.
• Filing Deadline: Form 65 must be filed on or before the due date for furnishing the return of income for the relevant tax year, as specified under Section 263(1) of the Income Tax Act.
• Reversion of Option: The Form also includes sections to address situations where the assessee chooses not to offer income for taxation under Section 194(1) (Table: No. 2) in subsequent years, which has implications for the concessional tax regime.

Documents required

• Self-certified copy of the Patent grant certificate.
• Proof of identity and address: PAN card and Aadhaar card.
• Audited annual accounts: Particularly if you are a business or association.
• Bank statements: To verify income and expenses.
• Form26AS: To reconcile any tax deducted at source.

Outcome Details

• Concessional Tax Rate: The primary purpose of Form 65 is for an eligible assessee to exercise the option to have their royalty income from an Indian- developed and registered patent taxed at a special, lower rate of 10% (plus applicable surcharge and cess), instead of their normal income tax rate.
• Intimation under Section 270(1):After the Income Tax Return (ITR) and associated forms (including Form 65 ) are filed, the Centralized Processing Centre (CPC) processes  The outcome is an intimation under section 270(1) sent to the taxpayer’s registered email address.
• Confirmation of Assessment: This intimation confirms that the return has been processed and details any adjustments made by the  It specifies the final total income, the calculated tax amount payable, or any refund due.
• Potential Discrepancies: If Form 65 is not filed on time (i.e., by the ITR filing deadline), the CPC may process the return by taxing the royalty income at the normal, higher rate.

Challenges and Solutions:

The revised Form 65 is proposed to be a smart form aimed at enhancing user experience and providing ease of filing through

a. auto-population/pre-filling of relevant details using information available in in ITR.

b. real time validations C error handling

c. dropdowns C date pickers

d. Standardization of name C address fields etc.

Common Changes made across Forms:

1. To make Forms system-friendly and enable e-filing and uploading, certain anomalies found due to grouping of Name, Designation, Address, PAN and Aadhaar number have been separated into different boxes.

2. Assessment/ Financial / Previous year or years have been replaced with Tax year or years, wherever appearing in the Form/Annexure.

3. Sections, Clauses and Schedules changed as per the Income-tax Act, 2025.