Now we are going to discuss on an interesting topic Tax on Blogging and freelancer in India. Today Blogging and freelancer is the fast emerging profession in the world. Any one from any core of the world can join this profession. No much investment is required. Blogging requires good written skills & knowledge of the area to which your blog relates and freelancing required knowledge of Google AdSense. Blogging can make maximum output with minimum input. Most of Bloggers and freelancer earns huge income but they didn’t know much about Income tax, benefits of paying Tax on their income. In Blogging no age limit is required.
Income tax on blogging and Freelancer income
There are five heads of income under Income Tax Act, 1961. The income from Blogging can be taxed under either one of the two heads depends upon the time you give to blogging–
a). Income from Business or Profession or
b). Income from other source.
If a person is doing blogging on regular basis then the income from such blogging is taxed under the head “Income from business or profession”. On the other hand if a person is doing blogging on part time basis then the income from such blogging is taxed under “Income from Other Sources”.
All the expenses incurred in relation to blogging can also be claimed as deduction. Some of the expenses are-
- Blog Designing expenses,
- Advisory expenses to expert Bloggers,
- Domain hosting expenses,
- Domain purchase expenses,
- Salary to employees,
- Rent expenses of place from you are doing blogging,
- Electricity expenses,
- Telephone expenses,
- Internet expenses,
- Any other expenses incurred in relation to earning revenue from blogging.
Now one question also arise whether income from blogging is to be taxed on accrual basis or cash basis. Accrual basis means income earned in May month is credited to account after one or two months. There is an option for bloggers either to show on receipt basis or accrual basis. But care should also be taken if you are showing your income on accrual basis then expenses should also be shown on accrual basis.
All the statements showing income & expenses of Ad sense should kept as proof. Following are the main income relating to blogging-
- Affiliated sales (Purchase made by person through the link of blogger)
- Advertisement income (third party ad sales, direct ad sales, Google ad sense)
- Income from consultancy relating to blogging
- Income from services like blog designing, referral link etc.
- Any other source of income relating to blogging.
It is compulsory to pay Income tax on net income from blogging profession. If you do not pay tax on Blogging income then such income will be treated as black money & attracts huge penalty or imprisonment. At what rate the income should be taxed depends upon the slab rates in which you are covered. For more details relating to Income tax slab rate copy & paste the link to your browser http://www.taxbaniya.com/income-tax-slab-rate-for-assessment-year-2015-2016/.
Now we can understand the above discussion with an example-
Suppose you have following income relating to blogging:
- Advertisement Income: 1,50,000/-
- Income from consultancy relating to blogging: 40,000/-
- Blog designing fees: 20,000/-
- Affiliated sales income: 10,000/-
Following are the expenses relating to blogging:
- Domain purchase: 10,000/-
- Internet charges: 5,000/-
- Domain hosting expenses: 4,000/-
- Telephone expense: 2,200/-
- Web designing expenses: 5,000/-
The Net Income from Blogging Profession is :
=(1,50,000+40,000+20,000+15,000)-(10,000+5,000+4,000+1,000+5,000)
=Rs. 2,00,000/-
The Net income should be taxed according to Income tax slab rates.
If there is an loss from blogging profession then same should be carried forward like business loss.
Presumptive Tax on Bloggers and Freelancer
If an blogger not want to maintain the books of accounts. He can select the presumptive taxation in income tax. In that he has to pay the 50% tax on gross income received. Example If he has billed of Rs 10 laks in a financial year than he has to pay the income tax on Rs 5 laks
Benefits of Paying Tax on Blogging Income and Freelancer
The income shown in Income tax return can only be considered as your True Money. The income which is not disclosed in income tax return is considered as black money & attracts penalty or imprisonment. To be on a safer side it is required to show your income from blogging in income Tax return.
If you want to take a loan from bank & financial institutions then they also require Income tax return. Therefore to create your wealth it is necessary to file Income tax return
GST on Blogging and Freelancer
Now question arises whether GST is liveable on blogging income or not. The Goods and Service tax is liveable on blogging income if he has exceed the turnover of Rs 20 Laks.
You can check here how to take the GST Registration – http://taxbaniya.com/gst-registration-in-mumbai/
Composition Scheme in GST
For Service industry government has come with the composition scheme in which Blogging and Freelancer can charge 6 perecnt GST and pay to the government. In this scheme he cannot claim the input credit of any purchase.
Export of service in GST
If a blogger received any income from the outside India than it will be exempts. He needs to take the GST number and LUT in GST.
You can check here how to take the LUT – http://taxbaniya.com/letter-of-undertaking-in-gst/
Thus it is clear that Blog owners are liable to pay goods and service tax.
Income Received in Paypal Accounts
If a broker received any income in PayPal accounts than he should collect the FIRC Copy from the banks or from the PayPal. Also he needs to pay the income tax on money received in PayPal. In GST it will be considered as export of service and exempt.
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