About the Royalty Calculator
What is the Royalty Calculator?
Licensing, franchising, publishing and music agreements often pay royalties as a percentage of net sales, with a minimum guaranteed amount and an advance that is recovered from future royalties. This royalty calculator handles all three.
For resident licensors, the payer deducts TDS at 10% under Section 194J on royalty payments above the yearly threshold.
How to use the Royalty Calculator
- Gross Sales (₹) (sample: 25,00,000)
- Returns, Discounts & Taxes Deducted (₹) (sample: 2,50,000)
- Royalty Rate (% of net sales) (sample: 8)
- Minimum Guaranteed Royalty (₹) (sample: 1,50,000)
- Unrecouped Advance Already Paid (₹) (sample: 50,000)
- Deduct TDS u/s 194J (10%)? (sample: Yes – resident licensor)
- Press Calculate Royalty (results also refresh as you type). The result card shows the Royalty Payable Now, along with Net sales, Royalty earned at the rate, Minimum guarantee top-up and Advance recouped.
Formula used
Royalty due = max(Net sales × Rate, Minimum guarantee); Payable = Royalty due − Unrecouped advance
- Net sales = gross sales − returns, discounts and taxes, as defined in the agreement
Royalty paid to non-residents is taxed under Section 195 at treaty or Act rates instead.
Worked example
These are the sample values already filled in the calculator above, and the result it returns for them:
| Input | Sample value |
|---|---|
| Gross Sales (₹) | 25,00,000 |
| Returns, Discounts & Taxes Deducted (₹) | 2,50,000 |
| Royalty Rate (% of net sales) | 8 |
| Minimum Guaranteed Royalty (₹) | 1,50,000 |
| Unrecouped Advance Already Paid (₹) | 50,000 |
| Deduct TDS u/s 194J (10%)? | Yes – resident licensor |
| Result | Value |
|---|---|
| Royalty Payable Now | ₹1,30,000 |
| Net sales | ₹22,50,000 |
| Royalty earned at the rate | ₹1,80,000 |
| Minimum guarantee top-up | ₹0 |
| Advance recouped | ₹50,000 |
| TDS (10%) | ₹13,000 |
| Net amount to the licensor | ₹1,17,000 |
Tips for using the Royalty Calculator
- Define "net sales" precisely in the agreement; it is the most common source of royalty disputes.
- Royalty is generally subject to 18% GST under reverse charge or forward charge depending on the parties.