However many bloggers take it as passion and they may differ from my above statement. But you all will agree that sky is the limit for blogging Income. No doubt it takes time to earn decent money from blogging. But once you start earning money, don’t forget that a portion of your online income belongs to government. Yes! you need to pay taxes.
In this articleI have presented the detailed information on Online Income and Taxes in India.
Before going to the list of various taxes you need to pay on your blogging income, let us understand the Indian tax structure.
Taxes are classified in two categories:
- Direct Taxes
- Indirect Taxes
Direct Taxes are taxes which are levied on persons for the income earned or activities conducted; they are to be borne by the person himself.
Examples are Income Tax, wealth Tax, Estate Tax, Property Tax etc.
Indirect Taxes are taxes levied on a product or services and which is born by the consumers while the immediate liability to pay the tax may fall upon another person such as manufacturer or service provider.
Examples are Service Tax, Excise Duty, Custom Duty, Central Sales Tax, Value Added Tax etc.
List of taxes applicable on blogging income. (India only)
It is governed by Income Tax Act, 1961.
It is the direct tax levied on the total income of a person earned during the year from various heads of income.
As per Income Tax Act, 1961 the total income is classified in five heads of income as follows:
- Income from the head salaries
- Income from the Head House Property
- Income from the Head Profit and Gains of Business or profession
- Income from the head Capital Gains
- Income from the Other Sources
Blogging income is taxable under the head “Income from Profit and Gains of Business or Profession” as business connotes some activity which is carried on by devoting time, attention and labour of a person either himself or through others normally with a motive to make profits.
Suppose a bloggers earns a gross income of Rs. 20 Lac during the year 2014-15 and his total expenses relating to blogging amounts to Rs. 5 Lac, then the net income taxable under income tax is Rs. 15 Lac.
- This income will be grossed up with income from other four heads. So the income tax will be paid on total income.
- The tax rates under income tax differs based on categories of persons like for individuals there is slab rate, for companies & firms there is flat rate.
- Income Tax rates changes every year by Finance Act (Budget) of relevant year.
- Find here the Income tax rates for financial year 2014-15 & 2015-16. (Assessment Year 2015-16 & 2016-17)
The due date of filing of income tax return (ITR) for company and any person other than company which are subject to audit under any law is 30th September of relevant assessment year. For other persons who are not subject to audit, the due date of filing ITR is 31st July of relevant assessment year.
For example the relevant assessment year for financial year 2014-15 is 2015-16. So the due date filing ITR of a company for financial year 2014-15 was 30th September 2015.
Please note that sometimes the above due dates are changed by income tax department by giving proper notification.
Service Tax is levied on blogging income at the rate of 14.5 %.
Service means any activity carried out by a person for another, for consideration and includes a declared service.
Service tax is levied on all services except the services mentioned in the negative list as per section 66D.
A blogger may have various types of income; service tax is levied on only that income which is in the nature of service.
Some important points relating to service tax are as follows:
- If the total receipts from services do not exceed Rs. 10 Lac, then a blogger can claim Small Scale Provider Exemption. There is no need for registration and payment of service tax for small scale service providers.
- If a blogger is selling goods online through his blog then the same will not be taxable under service tax.
- Service tax input can be claimed on service tax paid on input services used for providing blogging services. For example service tax paid on your internet bills, which is used for providing blogging services can be set off against the service tax to be paid on service receipts.
- There is a lot of views on taxability of Google Adsense income under service tax. According to my view, Google AdSense is an export service hence no service tax levied on this service.
- In case, of Individual service tax is paid by the 6th day of the month following the quarter in which service is provided but for last quarter the due date is the 31st march.
- In other cases, the service tax is paid by the 6th day of the month following the month in which service is provided but for the march month, the due date is 31st March.
- Service tax return is filed half yearly by the 25th day of the month following the half year( 25th September and 25th April) .
Example: Suppose a blogger Receives Rs. 15 lac from various affiliates programs (income from affiliate program is like commission received) and Rs. 25 lacs from Google Adsense.
The blogger can claim small service provider exemption of Rs. 10 Lac (if the service receipt in the previous year does not exceeds Rs. 10 lac), export service exemption of Rs. 25 Lac (for AdSense income) and for rest Rs. 5 Lac he will have to pay service tax.
Rs. (5 Lac/ 114.5 )*14.5 = Rs. 63,319/-
In the next year he cannot claim small service provider exemption of Rs. 10 lac (since service receipt in the previous exceeds Rs. 10 lac)
NOTE: From 1st June 2016 onward the rate of service tax will be 15% by introduction of Krishi Kalyan Cess @0.5%.
Value Added Tax (VAT)
I personally know one blogger who has a blog on Indian Astrology. In addition to AdSense income, he also makes money by the online sale of Astrological products through his blog. So in addition to Income Tax & Service Tax, he is also registered with VAT Laws and pays Value Added Tax on the regular basis.
So if as a blogger you are selling goods, you must be aware of some important aspects of VAT laws which I have presented here.
VAT is a multi-point tax on value addition i.e increase in value and it is another form of sale tax. It is collected at different stages of sale with a provision for set-off for tax paid at the previous stage. So a manufacturer, wholesaler & retailer pay tax on the value added by them in the product.
Suppose a wholesaler purchased goods for Rs. 25,000 and pays VAT @1% i.e Rs. 250 on it. Later he sold the goods for Rs, 35,000 and collects Rs. 350 as VAT @1% on it. So finally he will pay to the government only Rs. 100 as VAT. In other words, we can say he only paid VAT @1% on value added i.e Rs.10,000 X 1% = Rs. 100.
VAT is applicable on sale of goods within a state in which seller is registered.
VAT is a state subject and it varies from state to state. Every state has its own list of taxable and exempted goods. For example, if your business is registered in Delhi then you will have to follow DVAT provisions for the sale of goods in that state.
It is common in every state’s VAT Laws that there is a minimum amount of sales turnover which is exempted from VAT. For example, in Delhi sales of goods up to Rs. 10 Lac are exempt from DVAT whereas in UP the limit is Rs. 5 Lac for UPVAT. It i also optional if your turnover does not exceed this minimum monetary limit.
The VAT return/Payment in most of the states is filed & paid on the monthly/quarterly basis. The rate of taxes can also be broadly categorized in four parts as listed below:
- Nil rate:These includes Exempted goods from unorganized sector, items which are legally barred from taxation, goods having social implications.
- 1% rate: Precious Stones, Bullion, Gold & Silver Ornaments.
- 4% rate: It comprises of items of basic necessities, agricultural & industrial input, capital goods and declared goods.
- 12.50% rate: This includes the remaining commodities.
Please refer your state VAT laws for more information on it.
Central Sales Tax (CST)
As I mentioned under VAT regarding the selling of goods by a blogger I would like to add that if the blogger is selling goods to the other states then he liable for CST.
CST is applicable on sale of goods in the course of inter-State trade or commerce.
Central Sales Tax Act, 1956 govern the provisions of CST in India. Unlike VAT laws, CST is same all over India.
For example, If Mr. A sales residing in Delhi and selling goods to Uttrakhand, then he will pay CST on such sales.
The rate of CST is 2 % or VAT rate of that state from where goods are sold, whichever is lower, only if the sale is made to a registered dealer and form C is obtained by the seller from the purchaser.
Custom Act 1962
The blogger whom I mentioned above also sells Astrological goods to various parts of the world through his blog. When he approached me regarding the tax aspects of these transactions, I immediately asked him to get his Import Export Code (IEC) which is required as per Customs Laws. Custom Laws includes Customs Act, 1962 and Customs Tariff Act, 1975.
Custom Act, 1962 provides for levy of import and export duties of customs on goods imported into or exported from India through sea, air or land.
Customs Tariff Act 1975 has been enacted for classification of imported or exported goods. It also provides for various types of custom duties to be levied on importation and exportation of the goods.
So if a blogger is importing or exporting goods through his blog then he will have to comply with the provisions of Customs Act 1962.
I hope you all have got the basic understanding of Indian taxes applicable on online income. So Guys pay your taxes timely and file all your tax returns within due date. Please comment for any query on Online Income and Taxes in India.