With the advent of social media, there is an increasing need for bloggers and content producers. The popularity of the blogging industry is largely due to its high-income potential as well as the platform it provides for personal expression. The Income Tax Act’s tax regulations apply to the money a blogger makes.
Definition of a Blogger
A blog is defined by the dictionary as “a website that contains a writer’s or group of writers’ personal experiences, views, opinions, etc., and frequently has photographs and connections to other websites.” A person who often adds fresh information to this website is referred to as a blogger. A blog represents the author’s ideas and views and is an independent source of information.
Income Sources for Bloggers
A blogger may make money from their site through a variety of channels. Among them are:
- Promotions – The most typical way that a blogger makes money is through adverts. The blog turns becomes a platform for advertising a business’s goods or services. One of the most well-known ad networks, Google AdSense, offers bloggers who make their ad spots available for sale substantial rewards. The blogger earns money each time a reader clicks on the advertisements.
- Demands for the Paid Review – Popular bloggers might be personally approached by businesses with requests for compensated reviews. The blogger posts the review and receives payment.
- 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.
- Additional Sources – Other sources include freelance work, blog consultancy, blog design, SEO services, and content services.
Important: GST Compliance Guide on Income for YouTubers & Bloggers
Tax Implications on Bloggers
It should be clear that blogging revenue cannot simply be categorized within the five heads of income listed in the Income Tax Act. The income should be categorized under Income from Business or Profession according to the nature of the activity and will be handled as such.
Income Through Business or Profession
According to this provision of the Income Tax Act, the taxpayer is required to remit taxes on the net income after deducting all necessary costs and paying taxes on the income in the profit and loss account.
Permissible Expenses for Bloggers
Certain costs are allowed since blogging revenue will be taxed as business income. Only the income after deducting expenses will be subject to taxation. These costs will be subtracted from the overall revenue. The permitted costs are:
- Domain hosting expenses.
- Rent expense.
- Utility expenses such as electricity, telephone, etc.
- Employee salaries.
- Payments to freelance consultants.
- Convenience charges.
- Any additional charges that are incurred for the objective of earning income.
It is crucial to remember that the authorized costs must be expended in order to generate revenue. The business’s ability to generate revenue must be promoted or made easier by the costs incurred. The blogger is required to save the bills and receipts as legal evidence of the costs incurred.
Investment Options for Bloggers
By investing the revenues in certain investments like LICs, and PPFs, the blogger may also reduce their tax burden. According to section 80C of the Income Tax Act, the investments are deductible. According to the limitations outlined in the Income Tax Act, the deduction for the specified investments will be permitted.
Permissible Depreciation for Bloggers
The blogger acquires resources that are required for the operation of his job, just like any business would. A portion of the cost of an asset acquisition, such as a laptop, piece of furniture, or piece of office equipment, cannot be deducted in the year of the purchase. The price of the assets must be spread out during their lifetime. Depreciation is the phrase used to describe the distribution of an asset’s cost throughout its lifespan. Depreciation is another permissible item that the blogger may deduct from his earnings to determine Net Income.
Illustration
Mr Famous, a blogger, made an income of Rs. 10,00,000 a year from blogging. The profit and loss statement would be mentioned below:
| Facts | Amount in Rupees (Annual) |
|---|---|
| Blogging Income | 10,00,000 |
| Expenditures | (5,80,000) |
| Domain Hosting | 20,000 |
| Salary of the Employee | 60,000 |
| Rent | 1,20,000 |
| Utility Prices Like Electricity and Telephone Bills | 1,80,000 |
| Depreciation on the Assets (40% on 5,00,000) | 2,00,000 |
| Total Net Income Taxable | 4,20,000 |
The blogger can deduct any fixed investments from the said income and pay taxes on the balance amount according to the Income Tax Act’s slab rates.
Other Essential Facts:
- If the blogger’s income exceeds the threshold restrictions, they will need to pay the tax in instalments as it must be paid for revenue generated in the same year. It’s called advance tax.
- Within the due dates, the advance tax should be paid.
- The blogger must submit their income tax return by the deadline, pay any balance taxes, or claim a refund.
- Penalties and interest will apply if income taxes are paid late.
- A Permanent Account Number (PAN) is required for the blogger in order to file income tax returns.
- The income tax laws that apply to bloggers with regard to their blogging revenue are similar to those that apply to company owners who get money from their operations.
The rules of the Income Tax Act will apply in accordance if the blogger receives any additional income on top of that from blogging. The blogger is also accountable for extra taxes including the Equalization Levy, Tax Deduction at Source (TDS), and Goods and Services Tax (GST).
Define Content Creators
Over time new businesses and new methods of doing the old businesses arrive. One of the areas is content creation. In the same blog, we shall explore the income tax compliance required to get accomplished via content creators.
Income Sources for Content Creators
The content creators have the following income sources-
- Ad Income
- Brand Income
- Affiliate Income
- Merch Income
- Some Cases and Rental Incomes
Where to Report This Type of Income?
Many people show the income of content creators under 44AD by showing 6% (usually everything is via online channels). Section 44AD particularly does not include the businesses with commission income. Consequently, it must not be shown under section 44AD. Usually, there is commission income for YouTubers, which is contemplated in 26AS u/s 194H.
An additional view is there in the other industries where the commission income is been reflected under the head income from the additional sources, and therefore 44AD is selected but acknowledging the frequency and the sort of the income, it must not be notified under the head income from the additional sources.
The same must be notified under the regular scheme by preparing a profit and loss account. Related expenses to the income such as depreciation on equipment, digital media marketing, ad expenses, travel and refreshments, merchandise purchase or labeling, staff expenses, etc. must be kept in record, and consequently, taxes are to be calculated.
As per the kind of entity, the rate of tax is needed to be decided. It is good to remark that when the estimated tax obligation exceeds $10,000 per year, the advance tax also needs to be paid in instalments of 15%, 45%, 75%, and 100%.
Thanks for the tax implication guide.