A Complete guide on Income Tax for Indian bloggers & Freelancers

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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

  • Advertisements (Google Adsense, Direct Ad Sales etc.)
  • Affiliate Sales
  • Services like Blog Consultancy, Blog Designing, SEO Services, Content Services etc
  • Any other Source like Freelance income etc

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
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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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Karan Batra is a CA and blogs about Tax related matters on Chartered Club. He is also a Visiting Faculty Member at the Institute of Chartered Accountants of India

109 thoughts on “A Complete guide on Income Tax for Indian bloggers & Freelancers”

  1. Ubaid

    This post is really helpful to me thank you karan for your wonderful post
    But still i have some questions regarding filing it returns my transaction was the rs33000 in the year 2014-2015
    in this transaction i have paid advertising fees plus i have received my affiliate commissions do i have to file it returns?
    is it become compulsory for me

  2. Hello Sir,

    Please clear my some doubts for AY 2015-16

    for joint bank account holder:

    1. Is is mandatory to fill incometax return for foreign income from paypal by selling ebooks/service below 1 lakh? There is no TDS or anything reflected in form 26AS. Only source of income form paypal below 1 lakh and having PAN card.

    2. I have joint account. How can I get/trace total income deposited in bank account for my joint account holder as this foreign income from paypal earned by joint account holder?

    3. If yes then which form should I fill for joint account holder , having separate PAN no.

    for main account holder:

    4. Is only 26AS form income/TDS is applicable for incometax filling, like captail gain from mutual fund is not reflected in 26AS.Income from salary also for this PAN no.

    5. As there is no traces in 26AS for captail gain from Mutual fund . Is it mandatory to show in incometax return form captail gain or any income/TDS which is not reflected in form 26AS. How and where can I get this income/TDS details. Is incometax deportment trace all details for which no details available in form 26as.

    6. Is it manadatory to give all bank account.

    waiting for positive and quick reply.

    Thanks&Regards

  3. Amartya Ghosh

    Hello mr. Karan, I want a suggestion from your end regarding creating tax file online. I am a freelance Artist.I have no fixed monthly income.Sometime it’s 1.23 Lakh or sometime less than 25K. So i want your help if i have to do any tax filing . If yes, kind share the steps to do.I don’t have the idea,how to create tax file by ownself.

    Also i want you know that, when i started my job at companies, I opened my online account on incometaxindia.gov.in . But for longtime i haven’t opened it.

    1. Payal

      Hello,

      If you total income from a fiscal year is more 250000 then you need to fill tax as per current norms. else no. You can do it online with many Efiling services

  4. Vinay

    The LINK to the below sentence indicated in the blog above is broken and shows error 404. Can you please share the LIST OF Investments allowed to be claimed as deduction.

    The whole lists of Investments which are allowed to be claimed as a Deduction are given here.

    Thanks,

  5. andy

    Hi karan,
    Thanks for writing excellent blog here.. very informative.

    I work in software company in bangalore. I am also doing google adsense work for my site. I am owning 10 sites and my over all income is this year 10lacs. so below my stats
    *Salary income 4lacs
    *adsense income 10lacs
    total 14lacs
    for server , internet etc.. my expense will be 2lacs in a year.
    My questions:
    Can I work like this.. I mean comapany as well as adsense and can I pay income tax for both I mean company already paying yearly. Now which tax should I pay..
    I have seen above so many ppl wrote ITR 4s.. but my company filing ITR V

    Do I need to pay service tax??
    I don’t have so many proofs but with me 4-5 friends working to help me with my blogs. Can I tell that I am paying to them.??
    when Income tax ppl ask about the details for proofs. bills, electricity bills etc..

  6. Harish

    I am developing a s/w for USA client.My income is greater than 20lacs.Some are saying as its Forex amount, you just need to declare this amount under Exemption section while IT return filing and no need to pay the Tax for this amount.I don’t have any registered organisation or any such.The amount is transferred to my account directly from client.

    Any details on this is helpful.Thank you.

    1. Biju

      Hi Harish,

      I am in a similar situation where my income is more than 15 lakhs and I am transferring the dollars to my indian account.

      Do you have any clarity if I have to file taxes for the same. Looking forward to hear from you.

      Thanks
      Biju

      1. Harsh Agrawal

        @Biju
        You definitely need to pay income taxes on all the amount (Income) that’s coming to your bank account. It doesn’t matter if you are earning in Dollar or any other currency. What you should look at is, are you liable to pay service tax or not. That depends upon the nature of your income.

  7. Rahul

    Hello, Sir First Thanks a Lot For this article you are Helping a lot of new Bloggers and Website owners.

    Sir, I Have a Website Which is Information Based. My Ques. is Govt. Have Issue on My Income. I am Getting My Money From Diff-Diff Country Via Paypal.
    How Much Tax I Have to Pay on My Income.I am Thinking My Income of This Year Cross the 10 Lakh.

    Sir,Please Give Reply.

  8. ChowdaReddy

    Hi Sir,

    This article helps a lot to the users.
    I am going to work for a US client. My client is asking for invoice from me.
    Can I use different name on invoice, not my original name. And also is there any legal terms and conditions to follow for creating invoice.
    Can i create invoice on my own.

    And, please suggest me Tax provisions for my income like exemption limit, do I need to pay both service tax and income tax, any other legal requirements, tax payment schedules, any tax plannings.

    Please advice as I m new.

    Thanks in advance.

  9. venkat prabhu

    hi karan, thank for great info
    i few newbie doubts

    i started my online bussiness last year
    iam earning decent amount from PPD,CPA,Popup ads and infolinks…
    get paid via wire payments,paypal and payoneer

    iam using different name [not my original name] for most of my affiliate sites and for domain registration & hosting sites.

    you said there shoud be “source of income” and “expenditure incurred” while filing tax.

    1.in mycase what would be the souce of income to submit??
    affiliate site payments or paypal n payoneer payment proof?

    2. for “expenditure incurred”
    how can i submit expenditure proof as i used differnt names while buying domains and hostings?

    or can i just pay on financial year total revenue??

    sorry for my questions and english

    please help me out!!

  10. Kanika

    Hello Karan,
    I work as a software developer in a pvt. company. My annual salary package is 2.52 lacs. Till now there were no tax deductions from my salary account.But I also started freelancing work at the end of the year and I am expecting to cross taxable limit. My freelance money is in Odesk itself.I am confused when should I transfer this amount to Paypal and then to my account. I have no idea of procedures involved in paying taxes. Please help.

    1. Harsh Agrawal

      @Kanika
      The moment you will transfer money from Paypal into your bank account (Which I believe you are already doing), that money will become part of your actual income. Since your annual salary income is 2.52 Lack, you can make some investment into 80C (up to 150 lack), I would recommend into PPF (Do check how much your company is investing in EPF from your salary).. Try to keep your total taxable income lower than 2.5 Lack and you don’t have to pay taxes. Though do file your income tax return as it will help you to get loan and other benefits in future.

  11. Ankit

    Hi karan

    I am post-graduate student. Working on my project for US market and my target audience is Freelancers and self-employed people.

    I need some Income tax and finance plans as in Chart to put in project. Can you help for this or you can send me the links from where i can understand.

    Thanks
    Ankit Awasthi

    1. Rajesh Kumar

      I am not sure when the request was posted. I can help with this if you can send me little bit more specification of what you want to do. For example – do you want an actual chart in Excel or do you want just a picture of a chart to show in your app?…. etc… etc…

  12. Roy

    I run a news/media website and monetize it using adsense. I hire content writers, editors, web designers to help me run this website. Can I declare my income under provisions of Section 44AD (Presumtive Taxation). Having researched this online, I found conflicting reports. Some experts have said that income from a website should be considered as “income from profession” and NOT “business income” and hence Section 44AD does not apply. Is this true?

    1. Guru

      There is a new section 44ADA for professionals.. It’s same as 44AD, but difference is that minimum 50% of receipts should be considered as income.

  13. Sandeep

    I work for a private company and get 3lakhs per annum, this year i earned 2 lakhs from adsense( ads in mobile app made by me). Can i deduct all expence occur in making app.

    1. Sandeep

      Would like to know the same. Is income from Internet marketing eligible under section 44ad if it’s not commission based and is direct fee based?

  14. Ashish Desai

    Greetings Mr. Karan,

    The above article is very well-written and simple for a beginner like me to understand however I have a few queries regarding my consultancy business.

    I have an astrology consultancy business which I operate purely through online mode through a website I get 95% of income through my website only. I started it in 2013 but there was almost no income in the first year.

    However the income from March to December 2014 has reached around 1.7L and the website is now taking off well.
    I want to have income proof for as I do not have any other source of income and at the same time also want to get my business registered as consultancy services.

    Since my income is lesser than the present tax slab of 2 lakh rupees, is it possible to get a proof of income by filing I.T returns for the year 2014-15 now in December ?
    What steps should be taken as I will be filing for the first time.

    Thanks in advance.
    Best regards,
    Ashish Desai.

  15. chitrasen singh

    Sir,

    I am a Govt. employee and host a website. Is it necessary to take permission from my department to obtain a domain or host for a website..
    If I have not get NOC from my department and start earning from Adsense, then will this be count as any illegal activity please suggest?

    1. Smartvmp

      No , do not take its much seriously dude . Starting a website is totally a different thing then the govt jobs , we are living democratic country , No one stop you to starting an online biz/website .

      Go ahead
      Best wishes.

  16. Abhishek Kumar

    Hi Karan,

    Thanks for the great article. If you are a CA, I would like to hire you as my accountant. I am a freelancer with income reaching roughly Rs 18,00,000 per year. Please contact me on the email address provided in the space above or do leave me yours and I will be in touch.

    Best,
    Abhishek

  17. ash

    Hi, I am a psot graduate student and have recently started writing on iwriter.com and going to apply for the PAN card to get my payments from Paypal. I was confused as what to fill in AO type – as per official address or residential address. And one more question – working as a freelancer on iwriter.com is legl in India or not?

    1. Karan Batra

      Fill the AO Type as per your Residential Address.

  18. 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

    1. Karan Batra

      In India, you dont have to set-up any entity as such and can start right away in your own personal name… No legal approvals are required in your case…

      And the taxation would be same as explained in the article above..

  19. 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

    1. Karan Batra

      Yes, you can file ITR 4S.

      You are doing it in the right manner.

  20. 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.

    1. Karan Batra

      1. You can set-off loss from House Property against your Freelance Income.

      2. You can only set-off the interest paid on your share of the Loan. In case your share has not been mentioned, it would be assumed that you both are equal owners and your share would be assumed to be 50%

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