What exactly are personality rights? How are they interpreted
What's the story
If you are using your personal brand value, you must understand how personality rights are taxed in India.
These rights, also called publicity rights, grant control over the commercial use of one's name, image, likeness, or other aspects of identity.
In India, these are progressively being regulated under intellectual property and taxation laws.
Legal framework
Recognizing personality rights under Indian law
Although Indian law does not specifically define personality rights, they are protected by the Constitution's right to privacy and livelihood.
The Income Tax Act taxes income from these rights under "Income from Other Sources" or "Profits and Gains from Business or Profession."
For celebrities and public figures, this includes income from endorsements, appearances, and use of their persona.
Licensing vs. transfer
Tax implications for licensing and transfer
Licensing personality rights (instead of transferring them) enables individuals to maintain ownership and grant temporary usage to others, which produces income taxed as professional or business income.
On the other hand, a permanent transfer of these rights constitutes a sale, and the income derived is subject to capital gains tax.
The choice between licensing and transfer has a significant impact on the tax liability.
Managing expenses
Deductions and allowances
Individuals earning income through their personality rights can claim deductions for expenses directly related to earning that income.
These include promotional costs, legal fees for contracts related to the exploitation of personality rights, and any other expense incurred in maintaining one's image or brand value.
Taxpayers should keep detailed records of such expenses as they can significantly reduce taxable income.
Documentation & filing
Compliance requirements
Taxpayers need to follow certain documentation rules while declaring income from personality rights.
This means keeping contracts that outline the terms of engagements that produced such income, whether through licensing or outright sale.
Proper record-keeping is key to accurately claim deductions on expenses related to this.
All sources of income, including those from personality rights, must be reported in the annual tax filings to comply with Indian tax laws.