Taxes on Income received to blogging under income tax
Blogging has been one of the market’s trending occupations in today’s generation trending. The income-generating potential of this profession is one of the main reasons behind it.
It can earn lakhs of rupees per month, but they are unaware of the tax impact on their income most of the time. We are therefore writing this article today to educate you all about the taxation aspect of this well-known profession of blogging.
Sources of Revenue for a Blogger
- Advertising: Bloggers may sell space to advertisers on their websites to run advertising. The system can be automated, where space is claimed by the advertiser with the highest bid.
- Affiliate Marketing: Brands pay bloggers for their goods or services to be advertised. If the products or services are purchased by a customer via the blogger’s website, a certain mutually agreed sum is paid to the blogger.
- Sponsored Ads: If a blogger has built a reputation and an audience for themselves, interested brands pay them for endorsement of products
- Freelancing: Bloggers will also do several freelance services in which they would collaborate and get paid for the project in partnership with others.
Taxation Compliance applicable to Bloggers
There are mainly 4 types of compliances that Blogger needs to take care. They are as follows:
- Goods and services(GST)
- Income Tax
- Equalisation Levy
A). GOODS AND SERVICES(GST)
As per Section 7 of the CGST Act 2017, the section as supply is complied with in compliance with GST for all types of supply of goods or services or both made or agreed to be made for a consideration by an individual during or in support of the company.
It provide services by providing marketers with a platform to view their ads. A blogger is also considered as a service provider.
- The purpose of the services offered by bloggers can be categorised as online information and database access or retrieval services.
- According to Section 13(12) of the IGST Act, the place of supply is determined.
- The place of provision of online information, access to databases, or retrieval of services shall be the position of the service recipient in compliance with the provisions of section 13(12) of the IGST Act.
As such take Google AdSense as an example, where the provider’s location (i.e. the blogger) is in India and the recipient’s location (i.e. Google AdSense) is outside India.The supply place would then be outside India in such a situation.
Further, the question arises that whether Google AdSense service will be considered as the export of the service or not?
If the following five rules are met, this service is considered a service export. The rules are as follows
- The service provider is in India
- The service recipient is outside India
- The place of supply of service is outside India
- The payment was received in convertible foreign exchange for this service
- Service providers and service recipients are not just individual establishments
The next important question now is: What is the GST rate for the services offered by bloggers?
Place of supply plays a major role in deciding the blogger’s GST rate.
If a blogger provides Google Ad Sense services, etc. where the supply is located outside of India or an SEZ in India, the service shall be regarded as a service export/export.
And the export of goods and/our services is called zero-rated supply in compliance with Section 16(1) (a) of the IGST Act. This means that the blogger charges GST at Zero rated for certain services.
In accordance with the provisions of section 54 of the CGST Act, such a registered individual making zero-rated supplies may demand a refund of GST under one of the following options:
- Supplies beyond IGST payment through Bond/Letter of Undertaking-request refund for unutilised input tax credit
- IGST provision payment supplies for the provision of goods and/or services — IGST refund for claim payment
If the blogger provides services to an Indian organization to run its promotional advertisement on its blog, then the recipient’s location will be in India in such a case and 18% of GST will be responsible for that supply of services.
The law provides 2 kinds of reverse charge mechanism (RCM) scenarios.
- First is dependent on the nature of supply and/or nature of the supplier. Section 9(3) of the SGST/CGST (UTGST) Act & section 5(3) of the IGST Act cover this scenario.
- The second scenario is covered by section 9(4) of the CGST/SGST (UTGST) Act and section 5(4) of the IGST Act, where a taxable supply to a registered person is covered by any unregistered person.
An individual who is required to pay reverse charge tax must register under GST and in the case of a service provider, the threshold limit of Rs. 20 lakhs (Rs 10 lakhs for North Eastern and hilly states flagged as special category states) is not applicable to them.
Any sum payable under the reverse charge shall be paid by means of an electronic cash ledger debit. In other words, when using the input tax credit, the reverse payment liability cannot be discharged.
However, after the reverse charge liability is discharged, the beneficiary may receive the same credit if he is otherwise eligible.
B). Income Tax
Blogging Net Income Tax will be imposed on income that will be taken into account after such costs have been deducted. Some of the expenses are as follows:
- Expenses for Domain Hosting
- Office Rent Costs
- Expenses for Mobile or Internet
- Expenses on Electricity
- Charges of convenience Asset depreciation, such as desktop, smartphone or camera, etc.
- Any other costs associated with business
Bloggers should also notice that because of their savings in LIC premiums, ELSS Mutual Funds, PPF Account, Health Insurance, etc., they are also qualified for Chapter VI deductions as every other assessee.
The income estimate for the blogger would be as follows:
|Less: Deduction(if any)||xxx|
If a blogger is responsible for obtaining TAN registration, that person may have to deduct the source tax on certain transactions. The tax sum that the blogger deducts would have to be deposited with the central government.
On a continuing basis. The blogger would also have to file TDS Return(s) on a quarterly basis in order to provide tax credits to the parties from whose income the tax was deducted.
The provisions of Sec. 192 and Sec. 194 shall extend in the event that the blogger receives services from a resident employee or some other resident service provider.
However, if a service is rendered by a non-resident or a foreign entity, TDS will be deducted in compliance with the Double Tax Avoidance Agreement (DTAA) signed between India and the service provider’s country. Sec. 195 of the Income Tax is applicable in such situations.
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D). Equalisation Levy:
The levy on equalisation would apply to the following services:
(a) Amounts obtained or receivable for online advertising services or other relevant services by a non-resident, such as the provision of digital space to a designated person [Section 165 of the Finance Act, 2016]
If a blogger uses some digital ads, say through Google or Facebook, then in such a case, he would be responsible for paying a 6 percent equalisation levy. Furthermore, please note that, in the following situations, the equalisation levy is not applicable:
- The non-resident provider of the specified service shall have a permanent establishment in India and the specified service shall be linked to the permanent establishment or establishment in question.
- The service specified is not for the purpose of exercising business or professional activity (i.e. for personal purposes)
- In a financial year, the aggregate amount of consideration payable for the specified service rendered or receivable shall not exceed Rs. 1 Lakh.
(b) Amounts obtained or receivable from the supply of goods or services to designated persons by an e-commerce operator from e-commerce [Section 165A(1) of the Finance Act, 2016]
In the above case, the equalisation levy of 2% shall be paid on the amount obtained or receivable by the e-commerce operator from the supply of products or services produced or supplied by the e-commerce operator or facilitated to—
- A resident of an individual in India; or
- A person who purchases such products or services, or both, using Internet protocols located in India; or
- In the following circumstances, a non-resident individual:
- the sale of ads targeted at a customer residing in India or a customer accessing advertising through an Internet Protocol address in India; and
- Selling of data obtained from a person residing in India or using an Internet Protocol address residing in India.
Furthermore, it should be noted that the equalization levy of 2% is not available in the following cases:
- Where there is a permanent establishment in India for the e-commerce operator making or offering or facilitating e-commerce supply or services;
- U/s 165 of the Income Tax Act at 6% where the equalization levy is leviable;
- If, during the previous year, the sale, turnover, or gross receipts of the e-commerce operator from e-commerce supply or services made or given or facilitated to the above-mentioned persons is less than Rs. 2 crores.