Salman Rushdie's account of his time in hiding from the Iranian Fatwa and a Highland tale inspired by bagpipe music are in the running for Britain's oldest literary awards.

The shortlists for the James Tait Black Prizes are unveiled today, with Scotland-based writers Jenni Fagan, Alan Warner and Kirsty Gunn in the running for the £10,000 fiction prize.

Rushdie's book, Joseph Anton: A Memoir, is in the running for the biography prize, alongside Portrait of a Novel: Henry James and the Making of an American Masterpiece by Michael Gorra, The Last Sane Man by Tanya Harrod and William Harvey's Revolutionary Idea by Thomas Wright.

The two prizes – one for a work of fiction and one for a biography – are awarded annually by the University of Edinburgh for books published the previous year.

Fagan's The Panopticon, The Big Music by Kirsty Gunn, Leaving the Atocha Station by the US writer Ben Lerner and The Deadman's Pedal by Alan Warner make up the shortlist for the fiction award.

The Big Music is a novel about events in a pipers' academy in an old grey house in Sutherland.

Rushdie used "Joseph Anton" as a pseudonym while in hiding following the fatwa issued by Ayatollah Khomeini. The memoir is an account of his life under the fatwa, which lasted for 10 years until 1998.

The shortlist for the new James Tait Black prize for drama will be announced at the end of May.

The winners will be announced at the Edinburgh International Book Festival in August.

The chairman of the judging panel, Greg Walker, regius professor of Rhetoric and English Literature at the University of Edinburgh, said: "We have an exceptional line-up this year.

"The James Tait Black Awards represent the very best in fiction and bio- graphies and we have the chance to celebrate an exciting mix of respected writers and emerging talent."

The awards were founded in 1919 by Janet Coats, the widow of publisher James Tait Black, to commemorate her husband's love of books.

Each year more than 400 books and playscripts are read by academics and postgraduate students, who make the nominations.