Tax on Blogging Income Under the Income Tax Act

With the onset of social media, the demand for content creators and bloggers is ever on the rise. Blogging profession is popular not only due to the platform it offers for self-expression but also because it is very lucrative. The income earned by a blogger is subject to tax provisions under the Income Tax Act.

Meaning of a Blogger

The dictionary meaning of a Blog is ‘a website containing a writer’s or group of writers’ own experiences, observations, opinions, etc., and often having images and links to other websites.’So a blogger is an individual who publishes new content on this website regularly. A blog is an independent source of information and expresses the writer’s opinions and views.

Sources of Revenue For a Blogger

There are various sources for a blogger to earn money from the blog. Some of them are:

• Advertisements – The most common source of income for a blogger is through advertisements. The blog becomes a platform for promoting the products or services of a company. One of the most popular ad networks Google AdSense provides good benefits to bloggers who make their ad spaces available for business, every time a reader clicks on the ads, the blogger makes money.
• Affiliate sales – Here the blogger places links to products or services in the blog related to such products and services. If the reader clicks on the links and purchases the product or service, the blogger earns money.
• Paid review – Companies can directly approach a popular blogger and request for a paid review. The blogger publishes the review and earns money
• Others – The other sources are Blog Consultancy, Blog Designing, SEO services, Content Services, freelancing.

Tax Implications

As it is evident, blogging income cannot be easily classified into the five heads of Income as per the Income Tax Act. Given the nature of the activity, the income can be best classified under Income from Business/Profession and will be treated accordingly.

Income From Business/Profession

Under this section of income as per the Income Tax Act, the taxpayer must pay taxes on the income in profit and loss account after taking into consideration the total revenue and the expenses and remit taxes on the net income.

Allowable Expenses

The income from blogging will be taxed as business income, and hence certain expenses are allowable. These expenses will be deducted from the total revenue, and only the income net of expenses will be taxed. The allowable expenses are:

• Domain hosting expenses.
• Rent expense.
• Utility expenses such as electricity, telephone, etc.
• Employee salaries.
• Payments to freelance consultants.
• Convenience charges.
• Any other charges that are incurred for the purpose of earning revenue.

It is imperative to note that the allowable expenses must be incurred for earning revenue. The expenses incurred must promote or facilitate revenue generation for the business. The blogger must hold the bills and receipts as valid proof of expenses incurred.

Depreciation

Just like any business, the blogger also purchases assets that are necessary for the functioning of his work. In the case of asset purchases like laptops, furniture, office equipment, the cost cannot be claimed fully in the year of purchase. The cost of the assets must be distributed over the life of the asset. This apportionment of the cost of the asset over the life of the asset is termed as Depreciation. Depreciation is also an allowable expense, and the blogger can reduce it from his revenue to arrive at Net Income.

Investments

The blogger can also save taxes by investing the earnings in specified investments like mutual funds, LIC, PPF. The investments are deductible under section 80C of the Income Tax Act. The deduction for the specified investments will be allowable as per the limits specified in the Income Tax Act.

Illustration

Mr. Famous, a blogger, earns an income of Rs. 10,00,000 a year from blogging. The profit and loss statement is as below:

On the said income, the blogger can deduct any specified investments that are allowable and pay taxes on the balance amount as per the Slab Rates of the Income Tax Act.

Other Important Points:

• The income tax must be paid for the income earned in the same year; hence the blogger will be required to pay the tax in instalments if it exceeds the threshold limits. This is known as Advance Tax.
• The Advance Tax must be paid within the due dates.
• The blogger must file the income tax return within the time specified and pay the balance tax or claim refund.
• The delay in the payment of income taxes will attract penalties and interest.
• The blogger will need a Permanent Account Number (PAN) for the filing of the income tax returns.
• The income tax provisions applicable to bloggers with respect to the blogging income is comparable to a business owner receiving business income.

If the blogger is in receipt of any other income in addition to the blogging income, then provisions of the Income Tax Act will apply accordingly. The blogger is also subject to additional taxes such as Goods and Services Tax (GST), Tax Deduction at Source (TDS) and Equalisation Levy.

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