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A Complete guide on Income Tax for Indian bloggers & Freelancers

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A Complete guide on Income Tax for Indian bloggers & Freelancers

Income Tax for Indian Bloggers A new profession that has emerged in the past few years is blogging wherein people write articles and blogs. A major source of Income of such bloggers engaged in the profession of blogging is through

The best thing about earning from blogging is, it doesn’t require any age limit, and you can earn it all of your own. Many budding bloggers, who are earning handsome from blogging, are unsure about paying taxes on income from blogging in India. Here in this article I will try to give an overview of the manner in which tax is payable on Income from blogging.

Taxes payable on Income earned from Blogging in India

Income Tax and Service Tax are liable to be paid on income earned from blogging in India. In this article, I would mainly be focussing on the manner in which income tax is levied on blogging and in my next article I’ll try to explain service tax on blogging. The manner of computation of Income Tax has been explained in detail below in this Article.

(Please Note: If a person is earning income from salaries/ rent / interest from bank/ capital gains computation of Tax payable on his Income won’t be done in the following manner. This article has been specifically directed towards explaining the manner of computation of income earned from any blogging and other online sources which form a part of income from any business or profession)

Benefits of Filing Income Tax Return

The most important benefit of paying taxes and filing your income tax return is that only the income disclosed by you in your income tax return is considered your true income. If you are required to show your income at any place in future, only the amount disclosed in your income tax return would be considered as a valid proof of your income.

Moreover, even if you apply for any Loan from a Bank, you are mandatorily required to show them your income tax return and only the income disclosed in this income tax return would be considered as a valid source of income.

Secondly, there are many expenses which are done by the Govt. like construction of roads, airports etc. The Govt incurs these expenses from the taxes collected. It is a legal right of the govt to collect Income Tax and in case you don’t pay your income tax they may issue you a scrutiny notice and demand you to pay your Income Tax along with Interest and huge penalties.

Therefore, it is highly advisable for all income earning individuals to file their income tax returns before the due date with the Govt.

Computation of Income Tax in India

Any person earning income from any source is liable to pay income tax as per the tax rates prescribed by the govt. While computing the income on which tax is to be paid, the total of all Incomes earned by a Blogger are to be taken into account. You are requested to note that Income Tax is not payable on the Total Revenue earned but is payable on the Total Income earned. Total Revenue is the Gross Amount received and Total Income is the amount earned after Depreciation and Payment of Expenses incurred for the purpose of earning the Revenue.

The difference between Total Revenue and Total Income has been explained with the help of an example below:-

  • Total Revenue/ Total Turnover: Rs. 13,00,000
  • (Less) Total Expenses Incurred for the purpose of earning Revenue: Rs. 2,00,000
  • (Less) Total Depreciation on all Assets: Rs. 1,50,000
  • (=) Gross Total Income: Rs. 9,50,000
  • (Less) Deductions allowed for specified Investments: Rs. 1,00,000
  • (=) Total Taxable Income: Rs. 8,50,000

In the above example, income tax would be levied as per the income tax slabs on the total taxable income (i.e. Rs. 8,50,000) and not on total revenue (i.e. Rs. 13,00,000). The Income Tax Slab Rates keep changing are announced by the Govt in every budget.

Expenses allowed to be deducted while computing Income Tax

Deduction on INcome tax Any amount which has been paid for the purpose of earning revenue is allowed to be deducted as an expense. A few examples of the expenses allowed are as follows:-

  • Domain Hosting Expense, Domain Purchase Expense, Blog Designing Expense etc
  • Rent Expense
  • Electricity Expense/ Telephone Expense/ Internet Expense/ Water Expense
  • Salary to Employees
  • Payment to Freelance Consultants
  • Petrol/ Diesel Expenses
  • Any other expense incurred for the purpose of earning Revenue

Here, you are requested to note that only those expenses incurred for the purpose of earning Revenue are allowed to be deducted as an expense. For e.g.: If you invite a client for a meeting in a 5 star hotel, the payment made to the 5 star hotel is allowed to be deducted as an expense as this meeting would help you in increasing your business and would help you earn extra income. It is irrelevant whether you get extra business from this meeting or not, the point to be taken into account is that this expense was incurred for the purpose of gaining extra business.

But, if you go to a 5 Star Hotel for your personal purpose and not for business purpose, it would not be allowed to be deducted as an expense.

For the purpose of claiming these expenses, you are also required to provide proof of such expenses. Therefore, you are required to maintain a file showing bills of all the expenses incurred.

Depreciation on Assets

For the purpose of earning revenue, bloggers also purchase some assets. So for the purpose of earning revenue, if you’ve purchased any assets like mobile/ laptop/ car/ office furniture etc you are also allowed to reduce this form of expense incurred for the computation of total income.

However, the benefit arising from the expense incurred on the above mentioned assets would be arising for more than 1 year as these assets usually have a life span of more than 1 year. As the benefit would be arising for more than 1 year, the expense incurred shall also be attributed to more than 1 year.

In such cases where the expense has been incurred for purchase of any Asset, you are not allowed to claim the whole expense at one go. The total expenditure incurred for purchasing the asset is allocated over the life of the asset and you are allowed to claim this expenditure proportionately over the life of the asset. This can be explained with the help of an example below:-

For e.g.: If you purchase a laptop for Rs. 30,000 and the expected life of the laptop is 3 years, you cannot claim the whole Rs. 30,000 as an expense in one year as the life of the Asset is more than 1 year and this laptop would be giving you benefits for more than 1 year. In this case you would only be allowed to claim Rs. 10,000 (i.e. Rs. 30,000/3)

This method of proportionately claiming an expense based on the life of the Asset is called depreciation of asset. You are required to show the proof of expenditures made on purchase of Assets by showing requisite bills for the same.

Please Note: The Individual cannot himself decide the life of an asset and the Govt has already pre-defined the life of all the Assets.

Deductions allowed for Specified Investments

To promote the habit of savings amongst taxpayers and to channelize the resources in the right direction, the Govt also allows for Deduction for amount invested in specified investments. If a taxpayer makes an Investment in any of the Investment Options as specified by the Govt., he shall be allowed to claim deduction for the same. Income Tax would be levied on the amount so arrived after reducing the Deductions from the Gross Total Income.

Deductions for Investments made in specified Instruments are allowed and the most popular forms of Investment for claiming Deductions are Mutual Funds, PPF Accounts, Life Insurance Premium, Health Insurance Premium etc. The whole lists of Investments which are allowed to be claimed as a Deduction are given here.

Exemption from Payment of Income Tax

If the Total Taxable Income after deducting all expenses, depreciation & deductions allowed is less than the minimum income which is chargeable to tax, the individual is not mandatorily  required to file his income tax return.

As per the current Income Tax Slabs, no tax is payable if the Total Taxable Income of an Individual is less than Rs. 2,00,000. Therefore after deducting everything stated above, if the Total Taxable Income is less than Rs. 2,00,000 he is not mandatorily required to file his Income Tax Return and it is optional for him to file his Income Tax Return.

In cases wherein it is optional for the taxpayer to file his income tax return and he still files his Income Tax Return, in such cases he will file an Income Tax Return stating that the Tax payable by him is Nil.

PAN Card for filing Income Tax Return and Payment of Taxes

In India, there are many people by the same name. Let’s take the case of Harsh Agrawal. There are many people in India by the name of Harsh Agrawal. So if Harsh Agrawal goes and pays his Income Tax, how would the govt come to know which Harsh Agrawal has paid the tax?

So as to avoid this confusion, the govt issues a PAN Card to every taxpayer. PAN Card is a unique no allotted to every taxpayer. Only 1 PAN Card No is issued per person and for each Harsh Agrawal in this country, the PAN Card No would be different and it is through the PAN Card No that the govt would come to know which Harsh Agarwal has paid his Income Tax.

Every taxpayer has to apply for a PAN card no and this application can be made online as well. This is a one-time process and the PAN card no allotted to you would stay the same throughout your lifetime. Applying for pan card is a fairly easy process and application for the same can be made online as well as offline. The Charges for applying for a PAN card are very nominal and are Rs. 96 only.

The request for applying for a PAN Card is required to be made in Form 49A and online request for PAN Card No can be made through the TIN Portal on the NSDL Website. You are requested to note here that without PAN Card No. you cannot pay Income Tax.

As against popular belief, I would here also like to clarify that it’s not necessary for you to be 18 years of age to be applying for a PAN Card. You can apply for a PAN Card even before you are 18 years of age and this income would be counted as your income and not your parents income as you are earning this income out of your own skill.

Due Date for Payment of Income Tax

Every taxpayer is required to make payment of income tax during the year itself in which the income is earned. He is required to make the payment in instalments during the Year if the total tax payable during the year is more than Rs. 10,000.

Such payment of Income Tax during the year is called Advance Tax and due dates have been specified for the payment of advance tax during the year. The Payment of advance tax can be made online by submitting the requisite Challan Form on the NSDL Website.

The Due Dates for Payment of Advance Tax for all taxpayers (except Companies) is as follows:-

Due Date

Amount Payable

On or before 15th Sept

Not less than 30% of the Total Tax Liability

On or before 15th Dec

Not less than 60% of the Total Tax Liability

On or before 15th March

100% of the Total Tax Liability

Filing of Income Tax Return

At the end of the year, every taxpayer is required to file a statement of his taxes. This statement of taxes is called the Income Tax Return and this Statement should indicate:-

  1. The revenues earned and the sources from where they are earned
  2. The expenditures incurred
  3. The depreciation claimed on assets
  4. The investments made which have been claimed as a Deduction
  5. The Total Taxes paid incl. the Advance Tax paid or the TDS deducted (if any)

Delay in payment of income tax and filing of Income Tax Return would enforce levy of Interest and Penalty for the delay. In case a person has by mistake paid excess tax, he can also claim Refund of the excess tax paid.

The above article is only an overview of the computation of income tax on earnings from Blogging and it has been simplified so as to make it easier to understand for non-finance people. You are requested to refer to the Income Tax Act for exact interpretations.

In case of any query, feel free to ask them in the comments section below and I would be happy to help. If you find this guide useful, do share it on Facebook and Google plus.

This is a guest post by Blogger and Chartered accountant Karan Batra from Chartered Club. If you would like to write an original  guide for ShoutMeLoud, check our guest submission guidelines.

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{ 35 comments… add one }

  • Stephen

    Hi,

    thanks for these precious informations.
    I am a foreigner (I hold a PIO card) and plan to teach (tuition) online to students in Europe. In some countries there, you do not need to open a business for doing that, any individual can do it and just declare his earnings at the end of the fiscal year. How is it in India ? What kind of structure do I have to create to match the law ? Concerning taxation, will it be the same as the taxation of a blogger ?

    Thanks in advance,
    Stephen

    Reply
  • Prasanth G

    Hi,

    I’m running few websites like classifieds search engine, online gaming and few mobile apps (not blogs), and doing it from my home. I’m filling ITR 4S (Sugam) from last year, as I consider it a sole proprietorship business. Am I right?

    Thanks in advance,
    Prasanth

    Reply
  • Shobha

    Hello Karan,

    Thank you so much for the interesting & useful article.

    I’m an independent consultant offering services to a U.S based company from India.I have few questions relating to claiming loss from self occupied house property against my freelance income.

    For convenience the house property was registered both in my name & my spouse’s name.However the share proportion was not mentioned in the deed.

    Now that I have started earning recently, please clarify if it is possible for me to claim deduction with respect to interest on housing loan & principal repayment irrespective of my actual monetary contribution.(EMI) given that the loan is also taken in both our names.

    Thanks in advance.

    Reply
  • Shobha

    Hello Karan,

    Thank you so much for this useful article. I provide consultancy services to a U.S based company from India. I have few questions relating to deduction of loss from house property (self -occupied) from my freelance income.

    For convenience the house was jointly registered in both my name & my spouse’s name.However the proportion of ownership was not defined in the deed.

    Now that I have started earning please let me know if I would also be eligible for deduction in respect of the interest/principal paid on housing loan irrespective of my monetary contribution (EMI) given that loan has also been taken in both our names.

    Thanks in advance.

    Reply
  • pankaj

    I am a salaried person and paid a consolidated amount. I received Form 16 from my employee indicating deduction of amount 9050/- for TDS. I have file ITR online at income tax authority website myself and claiming TDS and have entered my house rent amount for which the software indicate monthly benefit @ 2000/-. I received ITR-V. Now I seek your opinion before posting it to ITR Authority whether I need to accompany any document with ITR-V or not. In case yes, please suggest name of document(s).

    Reply
    • Karan Batra

      Dear Pankaj

      You only have to sign and send the ITR-V

      No document is required to be attached with the ITR-V

      Reply
  • bunty

    thanks karan for this excellent article.

    i have one query:
    i work on a website with my wife. but the google adsense cheque comes in my name (personal account).
    as only one google adsense account is allowed per household.

    so, if i transfer half the adsense income to my wife’s account by net banking.
    then can i show the money transferred to her account as income paid to employees/freelancer/intern.
    thus my wife can show the income from website’s freelance work in her IT returns.

    i think, this question might be helpful to others also
    as sometimes more than one person works on a single blog.
    so i assume, if it is possible to share the revenue with your website partner account
    then the partner also has to file income tax for the same.

    lastly, if you are interested in filing income tax for bloggers
    then many of us will be more than glad to take your service.

    thanks in advance
    bunty

    Reply
  • Munish Sinha

    hello sir, should I got audit if receipt above 25 lakhs from google adsense.???

    Reply
  • Rekha

    Hello,
    I am running a blog and the source of income is Adsense(Google advertising).
    I am from Indian and currently living in US. I am running the blog from US and earning the income in USD.
    I chose the payment to be made in India. So Google is converting it to INR and sends me cheque every month to my India address.
    My question is, where should i pay the taxes? Will it come under US taxation or Indian Taxation.
    Please clarify.

    Reply
  • Arti Shaw

    Hi, Thank you for such a great info. Still I need few suggestion. Please guide.

    I am a freelancer blogger. I earns from adsense and via paypal. My 2013-2014 tax was submitted under ITR 2 mistakenly.

    I am using my saving ac. for all of this. I also created a trade license for my company but the problem is I am unable to open a current ac. with my company name as because my check comes with my name and it will not accept in my company ac. So, should i worried about this ac. separation or I can work with my saving ac? I pay for hostings, salary to staffs and commissions to freelancers as well. How to show these with my saving ac. Please guide me because I am in trouble.

    Reply
    • Karan Batra

      Dear Arti

      More than 70% of the Bloggers are operating through Individual name. So no need to worry about that from taxation point of view.

      The type of Bank Account does not make any difference. You can show the income in the normal way as you would have shown had it been a current account.

      Reply
    • preetam

      Ma’am,

      I am not a CA but still I have some experience in this and I think that you have done multiple things wrong.
      If you have registered a company, you need to do all the transactions in the company’s name and hence to a current account for your company. You cant use your personal account for this.
      If you are not having any registered entity (i.e you have not registered any company and dong things by yourself), then you can clearly use your personal account. Hope that you have used checks and taken receipts for all your payments including what you paid to your associates. that proof will be needed. If you don’t have proof of payment then you are out of luck. Your entire amount will be taxable.
      Please do understand that the taxing of a corporation is different from the individual taxes. Income tax mainly applies to individuals. What you earn at the end of the day.
      If you are having a company and the company made 10,00,000 then its not your earning until you take it to your personal account as your salary or dividend. That’s where the separation between a company and an individual helps.
      You definitely need a CA’s help to get out of this one.

      Reply
  • S Roy

    Wow really nice post – neatly arranged and covers everything related to the subject. I have one question though, is it necessary for freelancers to register for TIN or something similar (not much knowledge about these things!) if one’s income is through a foreign currency?

    Reply
  • Rohit

    Hello Sir,

    Firstly thank you for such a useful post. I am an independent software consultant, consulting for university in Singapore from my home in India. I have couple of queries regarding the income tax for myself.
    - As I am independent developer and I dont have any firm registered on my name, So while computing taxable income can I still deduct the business expenses such as internet, IT equipment depreciation, car depreciation etc from my income?
    - Is it okay for me to hire an intern and show the stipend paid to the intern as business expense?

    Thank you & Regards,
    Rohit

    Reply
    • Karan Batra

      Dear Rohit

      Yes, you can claim the all expenses from your income

      You can also keep an intern and the stipend paid to the intern can be shown as a business income.

      Reply
  • Viii

    Thank you so much for this information! It was very simple and interesting. Would not have known this about Income tax if it weren’t for you

    Reply
  • Rahul

    Thank you very much for the informative article, it helps a lot of people.

    What ITR form should be used for filing returns earned from blogging and or consulting?

    Best regards

    Reply
    • Karan Batra

      Dear Rahul

      For individuals earning income from Blogging or Consulting, ITR Form 4 is to be used.

      Reply
  • Aravind Panicker

    Dear Karan,

    First of all, thank you so much for this helpful article.

    I am a freelance software developer working for a US based company from home. It was good to know that expenses incurred for the purpose of earning Revenue are allowed to be deducted as an expense. I checked that with a TAX consultant in our area but they are not sure about it.

    In my case, our electricity and telephone connections are billed in the name of my father. Is it possible to include them in my expense list? Also I have invested a good amount of money for setting up my home office (laptop, desktop, UPS, A/c etc..). Is it possible to deduct that amount while calculating my taxable income?
    Please reply!

    Thanks in Advance

    Reply
  • Aravind Panicker

    Dear Manoj,

    First of all, thank you so much for this helpful article.

    I am a freelance software developer working for a US based company from home. It was good to know that expenses incurred for the purpose of earning Revenue are allowed to be deducted as an expense. I checked that with a TAX consultant in our area but they are not sure about it.

    In my case, our electricity and telephone connections are billed in the name of my father. Is it possible to include them in my expense list? Also I have invested a good amount of money for setting up my home office (laptop, desktop, UPS, A/c etc..). Is it possible to deduct that amount while calculating my taxable income?

    Please reply!

    Thanks in Advance

    Reply
  • Manoj

    Hello Sir,

    It was really an interesting and most easy article i could find to clear my all doubt regarding the Income tax for Freelancer. I am also a freelancer and most of my doubts are cleared by reading above post and comments.

    My over all total revenue for last year 2013 is more than 2 lacs and i have not done calculation of any expenses done for the purpose of earning revenue. This is the first time i have earned more than 2 lacs. So my questions are as follow:

    1. Am i too late to file income tax return for last year?

    2. Should i hire someone more professional do this for me like any CA ? if yes, then what is the fee and procedure. If no, then how should i file it myself.

    My apologies if i have missed something or asked anything wrong as i am completely newbie to this Income Tax.

    I would highly appreciate your help here.

    Reply
    • Karan Batra

      Dear Manoj

      1. You may not be having the exact details of the expenses but you would be having some idea of the overall expenses done like Hosting Expense, Internet Expense, Telephone Expense etc.

      If after all these expenses, your Income is more than Rs. 2 Lakhs – you would be required to pay income tax and file income tax return

      2. For the financial year ending on 31st Mar 2014, the last date in your case would be 31st July 2014.

      3. In your case, as your business size is small its not necessary to hire a CA. The minimum fees of a CA is sometimes too high for a new business to afford. If you can afford it, it would be great – else you can contact income tax return preparers (usually graduates) who would do the same thing at a lesser fee

      Reply
      • Manoj

        Thanks a lot Sir!

        That clears my all of the doubts.

        Reply
  • Checkcy

    Hi there,

    I am a freelancer working as a writer to a US based company. Till September i used to earn just 10K per month and from the month of September my salary was doubled. By god’s grace and due to high dollar value, my income from the said month is around 25K/month.

    Apart from this, i and my friend take freelance writer projects and so i made some paypal transactions amounting to almost 1,00,000 from May 2013- November 2013. The money paid by my clients was gained through my paypal account and then it was transferred to my bank account.

    So, this is again an extra income for me. I do not have any expenses as i have no valid proof to claim them.

    i am sure that my income will be more than 3 lacs by the end of this current financial year.

    This is for the first time i am getting salary into my bank account. Earlier, i used to take my pay directly from my contractor by hand and after clearing my expenses for that month, i just used to deposit around 5K every month in bank. So, till 2012-2013 i never had the need to think of income tax.

    But this year, my salary is getting deposited into my bank account as i am working for a US company. Actually, i earn in dollars and when they get converted into Indian rupees, whatever amount is accrued, it is deposited in my account through ODESK freelance website.

    So, my question is does the tax get directly deducted from my account after March 31st,2014 via TDS and if yes, what should i do to make a claim or get it back?
    Can I show medical expenses of my father as he is a dependent or buy NSC certificates to claim for refund?

    If yes, what is the procedure to do so?

    Please help me……..

    Reply
    • Karan Batra

      1. As you are getting income from abroad, the chances are very less than TDS would be deducted.

      2. You can invest in NSC upto Rs 1 Lakh and claim tax benefits. There are various other instruments as well wherein you can invest like PPF, Tax Saving Mutual Fund, Tax Saving FD etc.

      Reply
  • Ankit

    This was too helpful. I wasn’t aware about most of the points mentioned above. Great share, thanks!

    Reply
  • Amardeep

    I am selling an ebook(just a pdf file) for a cost of rs 90 on my website.
    Do I need to pay tax for it?
    If yes then please explain me the type of tax and complete procedure for paying tax.
    That pdf is just downloaded to the buyers computer no delivery what so ever is needed.
    Kindly tell is sell pdf online in india is also taxable?

    Reply
    • Rahul Agarwal

      Yes amardeep Income Tax means tax payable on your INCOME. Income earned by any method is Taxable.

      Reply
  • Yadap

    Thanks for the simplest ever instruction on how to pay taxes and file returns for any freelancer/ individual. Missing points:
    1. Whether medical expenses incurred to him/her and the family members is tax exempted if no medical insurance is in place.
    2. Which ITR form should be used to file the returns for freelancers?
    3. If a freelancer provides consulting service to a company or individual abroad how do we calculate bill/invoice? Should I charge service tax to my client abroad and pay the same to Tax Deptt?

    Thanks,

    Yadap

    Reply
  • amit

    Dear Karan Sir

    first of all thanks for writing this detailed and well needed article.

    i have one query.
    you have mentioned that we can show house rent as expense since we are operating our websites from home.
    suppose our house rent for the year is 150,000 INR
    so can we show the full amount of 150,000 INR as expense ?

    my confusion is coming from the fact that maximum house rent that we can claim per month is 2,000 INR (i hope i am not wrong as i don’t know much about income tax).

    so i assume here we are not claiming for house rent but just showing the house rent paid as expense.

    and thats the difference in this case.

    thanks in advance
    amit

    Reply
  • Sadique Shaikh

    Hello,
    I am working as an adwords experts how should i show tax return file for adwords ad i ran for my client .Some clients have really high daily budget upto 5000rs

    In this cases what step i should take to give my expenses record details

    Reply
    • karan.batra

      The amount you have paid for adwords can be claimed as an expense and would be deducted from your total receipts…

      The print-out of the email sent to you by Google stating the amount charged on your Credit Card would form a valid proof of expense…

      Reply
  • stargaterich

    This is a very cool post that is quite different from the standard blog articles pertaining to making money online. Filing taxes is very important and I like the fact that details are explained in clarity , short, sharp and precise. One thing that is not covered is that it is important to highlight the need to have separate bank account for personal saving versus business profit. I used to made the mistake of using the same personal bank savings account for both personal as well as home based business profits. As a result when it comes to filing tax, it can be quite cumbersome.

    Reply
    • karan.batra

      Thanks for the feedback

      I agree that is beneficial to maintain 2 separate bank accounts but this is a personal preference… Some people say that it gets difficult for them to maintain 2 bank accounts and they end up inter-mixing personal and business transactions…

      So, if you can maintain 2 different bank accounts, it is a good habit and will help you at the end of the year provided you don’t end up inter-mixing transactions

      Reply

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