A Complete guide on Income Tax for Indian bloggers & Freelancers

With a sudden rise in the number of professional bloggers in India, most of whom are earning full time through blogging, the constraints and doubts on the calculation of income tax for these professionals has only augmented.

So, in order to provide some help and knowledge about calculating income tax for Indian bloggers, I am writing this helpful article that would serve as a great referral to many such professionals, most popularly known as the webpreneurs.

Before we get on directly on to the topic of income tax, we must understand the income source for bloggers.

Major income sources for bloggers:

Advertisements: The major income for most bloggers out there comes from Google Adsense, Google’s Advertising platform for publishers. Besides that, there are several other modes of advertisements with different third-party providers such BuySellAds, Chitika, Yahoo’s Media.net etc.

Also, there are different types of advertisements in the market ranging from advertisement banners to text ads to sponsored posts.

Affiliate Sales: Next up is affiliate marketing. If you are reading this blog post, I am pretty much sure that you are a blogger and aware of the term affiliate marketing and generating income through affiliate sales.

Blog or Website related Services: Besides selling ad space or generating sales for businesses, there are several bloggers, who blog to sell their own blog or website related services such as Internet Marketing, Web Design and Development, Social Media Marketing etc.

Now, the matter of the fact is that earning from blogging is quite simple, though not easy and it has no age restrictions and anybody can earn through blogging from the comforts of their home. Hence, most of these young budding bloggers aren’t sure about paying taxes on their income from blogging in India.

Today, from this blog post, I would like to share a detailed information about income tax payable on your income through blogging.

Are Taxes payable on Income earned from Blogging in India?

Yes, Income Tax is required to be paid by every individual on the income earned from blogging in India as per the tax slabs prescribed by the IRS department of Government of India. Through this article, I will guide you through the guidelines and the process of determining the income tax levied on your blogging income.

However, before we get into the process, let be clear that this guide is strictly limited for the calculating and filing income tax for income earned from blogging. The guide won’t be applicable on any income earned from salaries, rent, interest from the bank or any other capital gains. This article is specifically directed to the income earned from blogging or other online sources, whether online business or profession.

How to Calculate Income Tax in India?

Remember that, every individual earning income in India falls within tax laws and is liable to pay income tax, if the income falls under the tax slabs determined by the Revenue Department of of India.

Also keep in mind that the income tax is paid on the total income earned by the individual during the assessment year and not on the total revenue earned during that period. It may sound the same thing, but total income and total revenue are very different.

Total Revenue is the Gross Amount you received or earned during the financial year, whereas Total Income is the amount left after deducting the Depreciation and Payment of Expenses incurred during earning the revenue.

The best way to explain this concept would be through an example.

Let’s say I earned around Rs. 15,00,000 in the financial year 2015-16 through blogging, so the Total Revenue for the period sums up to Rs. 15,00,000. Now during this year, I had to spend some money for the purpose of earning my blogging income, such as hiring writers, internet bills, programmers or developers for theme modifications, hosting and domain fees etc. So, I am liable to deduct those expenses, that sums up to around Rs. 2,00,000 of that year, from the Total Revenue.

Now, next move on to Depreciation on all the assets I used to earn my blogging income that includes my laptop, printer, smartphone, work desk, and all the other stuff, I got to buy to run by blog productively. However, these costs are not levied every year as each item has a life span of over 1 year and will be used for multiple years. Hence, the depreciated value of each asset will be in parts of their total purchase value. So, my Depreciation of all assets owned by me for the purpose of blogging rounds up to Rs. 75,000.

Apart from the expenses incurred and Depreciation of Assets, I also invested Rs. 1,00,000 in few tax saving schemes. As these are tax saving schemes, I can deduct the amount invested from my Gross Revenue as well.

So, the final round up will be something as below:

Total Revenue / Gross Revenue: Rs. 15,00,000

Total Expenses Incurred: Rs. 2,00,000

Depreciation of Assets: Rs. 75,000

So, Total Income = Rs. 15,00,000 (Total Revenue) – Rs. 2,00,000 (Total Expenses Incurred) – Rs. 75,000 (Depreciation of Assets) = Rs. 12,25,000

Tax-saving Investments: Rs. 1,00,000

Hence, Total Taxable Income = Rs. 12,25,000 (Total Income) – Rs. 1,00,000 (Tax Saving Investments) = Rs. 11,25,000

Note: You can deduct all the investments from your Total Income as there are certain limits allowed by the IRS department for exemption for a financial year. So, choose wisely before you invest in any Tax Saving Schemes.

So, as per the above example, the tax on my income will be calculated as per the total taxable income that sums up to Rs. 11,25,000 and not on the total revenue earned that was Rs. 15,00,000. Now, I need to check the income tax slabs prescribed by the Government for the assessment year and pay the tax accordingly.