Taxation on Blogging Income: GST and Income Tax

Last Updated On: May 26, 2020, 2:40 p.m.
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Tax on Blogging Income under Income Tax and GST

Introduction:

In recent days, Blogging has become one of the trending professions they earn lakhs of rupees per month but they are not aware of tax implications on their Income. Bloggers are mainly those people who share their knowledge & passion through words by way of a full-fledged website or sometimes they create platforms for other people as well to come and share their views on that website.

Here are a few sources of Income from Blogging:

Advertising like Google AdSense: Google AdSense works as a medium between the Bloggers and Advertisers from which Bloggers earn their revenue when advertisements placed on their blog receive clicks.

Affiliate Marketing: Generally bloggers write reviews and give suggestions on things like best hosting, best domain provider, best electronic products, etc. as per their blog niche. Inside the content they generally place the affiliate links in the blog and once the reader of the blog purchases the company’s product/service using that link, the blogger gets a fixed percentage of Commission.

Sponsored Post/Advertisement Placement: In this medium, companies directly contact bloggers and offer them sponsorship on paid review or place advertisement banner on the website sidebar or even in any article.

Tax Implication/Compliances on Bloggers:

1.Goods and Service Tax(GST):

According to section 7 of the CGST Act 2017, all forms of supply of goods or services agreed to be made for a consideration by a person in the course or furtherance of business are treated as supply under GST. 

Bloggers supply services by providing a platform to the advertisers to display their advertisements. Hence, a blogger is considered as a supplier of services.

The nature of services provided by the blogger can be categorized as Online information and data retrieval access.

The place of supply will be determined in accordance with section 13(12) of the IGST Act. In accordance with this provision the place of supply of Online Information and data retrieval access shall be the location of the recipient of services.

 

If the location of Blogger is in India and the location of the recipient is outside India, then the place of supply will be outside India.

There are 5 rules to be satisfied to qualify a service as export services:

  • The supplier of service is located in India
  • The recipient of service is located outside India
  • The place of supply of service is outside India
  • The payment for such service has been received in convertible foreign exchange
  • The supplier of service and the recipient of service are not    merely establishments of a distinct person

  

Rate of GST to be paid by the Blogger:

Place of Supply plays an important role in the determination of the GST Rate.

 

If the Blogger is providing services outside India or Special Economic Zone(SEZ) according to the provisions of Section 16(1)(a) of IGST Act, then the rate of GST to be paid is 0%

 

 Such registered person making zero rated supply can claim Refund of GST under either of the following options, in accordance with the provisions of section 54 of the CGST Act:

  1. Supplies without payment of IGST under Bond/Letter of Undertaking– claim a refund of unutilized input tax credit
  2. Supplies with payment of IGST on the supply of goods and/or services – claim a refund of IGST paid

 

In case if the Blogger is providing services to an Indian Organization then the location of the recipient will be India. Hence, the GST rate charged will be 18%.

 

Reverse Charge Mechanism:

Reverse Charge means the liability to pay tax is on the recipient of supply of goods or services instead of the supplier of such goods or services in respect of notified categories of supply.

There are two types of reverse charge scenarios provided in law. The first one is dependent on the nature of the supply or nature of the supplier. This scenario is covered by section 9 (3) of the CGST/SGST (UTGST) Act and section 5 (3) of the IGST Act. The second scenario is covered by section 9 (4) of the CGST/SGST (UTGST) Act and section 5 (4) of the IGST Act where taxable supplies by any unregistered person to a registered person is covered. Reverse charge liability cannot be discharged by using the input tax credit. The person making the advance payment has to pay tax on reverse charge basis.

A person who is required to pay tax under reverse charge has to compulsorily register under GST and the threshold limit of Rs.20 lakhs (Rs.10 lakhs for North Eastern and hilly states flagged as special category states) in case of a service provider, is not applicable to them.

 

2.Income Tax:

Income Tax will be imposed on Blogging Net Income which will be considered after the deduction of certain expenses.

 The expenses which are incurred by the bloggers that can be allowed against the income earned by them under the Income Tax Act.

  • Domain Hosting Expenses
  • Rent Expenses for Office
  • Telephone or Internet Expenses
  • Electricity Expenses
  • Convenience charges
  • Depreciation on the Assets like Laptop or Mobile or Camera etc.
  • Any other business-related expenses.

Computation of Taxable Income of blogger:

Particular                          Amount(Rs)

Gross Income                           XXX

Less: Expenses                     (XXX)

Net Income                             XXX

Less: Deductions( if any)       (XXX)

Taxable Income                       XXX

 

3.Tax Deducted at Source (TDS):

If a blogger is liable to get TAN Registration, such a person will have to deduct tax at source on certain transactions. Such tax amount deducted by the blogger will have to be deposited with the Central Government on a regular basis. Also, the blogger will have to file quarterly TDS Return(s) in order to give a tax credit to the parties from whose income the tax has been deducted.

In case the blogger receives services from a Resident employee or any other Resident service provider, the provisions of Sec. 192 and Sec. 194 shall be applicable.

However, If the service is provided by a Non-resident or a foreign entity then TDS will be deducted in accordance with Double Tax Avoidance Agreement (DTAA) signed between India and the country of the service provider. In such cases, Sec. 195 of the Income Tax is applicable.

4.Equalization Levy:

The equalization levy will be applicable to the following services:

A)Sum received or receivable by a non-resident for the online advertisement services or other related services such as provisioning of digital space rendered to a specified person [Section 165 of the Finance Act, 2016].

If Blogger uses any Digital Advertisement such as Facebook or Google in such a scenario he will be liable to pay Equalization levy at 6%.

 Equalization levy shall not be applicable in the following cases:

a) The non-resident providing specified service has a permanent establishment in India and the specified service is connected with such permanent establishment.

b) The specified service is not for the purpose of carrying out business or profession.

c) The aggregate amount of consideration payable for the specified service received or receivable does not exceed Rs.1 lakh in a financial year.

B) Sum received or receivable by an e-commerce operator from e-commerce supply of goods or services to specified persons [Section 165A (1) of the Finance Act, 2016]

Equalization levy at 2% shall be charged on the sum received or receivable by an e-commerce operator from e-commerce supply of goods or services made or provided or facilitated to-

1. A person resident in India.

2. A person who buys such goods or services or both using internet protocols located address in India.

3. A non-resident person in the following circumstances:

(i) Sale of advertisement targets a customer who is a resident in India or a customer who accesses the advertisement through an internet protocol address located in India.

(ii) Sale of data collected from a person who is a resident in India or from a person who uses an internet protocol address located in India.

 Equalization levy at 2% shall not be applicable:

1. Where the e-commerce operator making or providing or facilitating e-commerce supply or services has a permanent establishment in India.

2. Where the equalization levy is levied u/s 165 of the Income Tax Act at 6%,

3. If the sale, turnover or gross receipts of the e-commerce operator from e-commerce supply or services made or provided or facilitated to the persons mentioned above is less than Rs.2 crores during the previous year.

 

Frequently Asked Questions:

1. How should one file tax return when he has multiple sources of income including salary and blogging income? Is it necessary to file a tax return with disclosure of one’s secondary income as well such as blogging?

Ans: While filing the Income Tax Return you have to disclose all the income earned by you during the previous financial year. In case of blogging income, while filing your Income Tax Return show your salary income (from Form 16) under the head Income from Salary and regarding your blogging income show it under the head Income from Business and Profession. Please note that only the Net income of the blogger will be taxable after allowing relevant business expenses and deductions.

 

2. As an individual blogger, how can I save tax?

Ans: Tax saving options for a blogger or digital marketer:

a) You can claim business expenses from your gross income. Some of the eligible business expenses are as under:

  • Domain Hosting Expenses
  • Website development charges
  • Software Development expenses
  • Rent Expenses for Office
  • Telephone or Internet Expenses
  • Electricity Expenses
  • Salary paid to employees
  • Convenience charges
  • Depreciation on the Assets like Laptop or Mobile or Camera etc.

b) Make your investment wisely – Like any other assessee you are also eligible for Chapter VI deductions on account of your investments in LIC premiums, ELSS Mutual Funds, PPF Account, Health insurance, etc.

c) Tax Planning – A good tax planning will always help you to save your taxes. You can take the help of tax professionals for planning your taxes. Tax planning helps with timing income and expenses, as well as optimizing investment and retirement accounts.

3. As a blogger, is it mandatory for me to file Income Tax Return? And what are the consequences if I don’t file it?

Ans: In any of the following situations (as per the Income Tax Act), it is mandatory for you to file an Income Tax Return in India:

a. Your gross total income (before allowing any deductions under section 80C to 80U) exceeds Rs 2.5 lakhs in FY 2019-20. This limit is Rs 3 lakh for senior citizens (aged above 60 but less than 80) or Rs 5 lakhs for super senior citizens (aged above 80).

b. You are a company or a firm irrespective of whether you have income or loss during the financial year.

c. You want to claim an income tax refund.

d. You want to carry forward a loss under a head of income.

e. If you are a Resident individual and have an asset or financial interest in an entity located outside of India. (Not applicable to NRIs or RNORs).

f. If you are a Resident and a signing authority in a foreign account. (Not applicable to NRIs or RNORs)

g. If you are in receipt of income derived from property held under a trust for charitable or religious purposes or a political party or a research association, news agency, educational or medical institution, trade union, a not for profit university or educational institution, a hospital, infrastructure debt fund, any authority, body or trust.

h. If you are a foreign company taking treaty benefit on a transaction in India

In case you are mandatorily required to file your Income Tax Return but you do not file the same within the specified time limit, then penalties for non-filing of Income Tax Return shall be as follows:

a. A penalty of Rs.5,000 is applicable if the return for FY 2019-20 is filed after the due date but by 31 December 2020.

b. A penalty of Rs.10,000 is applicable if the return for FY 2019-20 is filed after 31 December 2020 but by 31 March 2021.

Note: Penalty is limited to Rs.1,000 for those with income up to Rs 5 lakhs. These provisions are covered under Section 234F. 

4. Is it compulsory for the blogger to obtain TAN? If not, then what are the eligibility criteria for TAN applicability? Is it based on turnover?

Ans: Every person liable to deduct tax at source or collect tax at source is required to obtain TAN. Turnover is not the sole criteria for TAN applicability.

However, a person required to deduct tax under section 194-IA (TDS on Property Purchase of Value Higher than Rs.50 Lakh) can use PAN in place of TAN as such a person is not required to obtain TAN.

Further, a person required to deduct tax under section 194-IB or section 194M shall not be required to obtain TAN.

Please note According to Section 194IB, it is mandatory for any person, i.e. individuals/HUF not liable to audit u/s 44AB, to deduct taxes for a rent paid to a resident, exceeding Rs.50,000 per month.

5. Can we collect GST from a client who does not have GST Registration?

Ans: It does not matter whether the client has a GST Registration or not.  If you are having GST Registration, then you have to compulsorily charge GST to all your clients, collect the tax from them and then make the payment of GST to the Govt. 

6. What is Advance Tax? Should bloggers know about it? Is there any benefit on paying such Advance Tax?

Ans: Every taxpayer is required to make payment of income tax during the year itself in which the income is earned. He/she is required to make the payment in four installments 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.

Since income earned by bloggers is taxable in India, the advance tax provisions will also be applicable to them.

The benefit of paying advance tax is that you will save yourself from paying unnecessary interest u/s 234B and 234C.

Due dates of Advance Tax:

a) for taxpayers other than those covered u/s 44AD or u/s 44ADA

ADVANCE TAX DUE DATES

PERCENTAGE OF ADVANCE TAX PAYABLE

On or before 15th June 15% of advance tax
On or before 15th September 45% of advance tax less advance tax already paid
On or before 15th December 75% of advance tax less advance tax already paid
On or before 15th March 100% of advance tax less advance tax already paid

 

 

b) for taxpayers covered u/s 44AD or u/s 44ADA

ADVANCE TAX DUE DATES PERCENTAGE OF ADVANCE TAX PAYABLE
On or before 15th March 100% of advance tax

 

7. I am a blogger and I have formed a Limited Liability Partnership (LLP). My question is how can I file forms such as Form 11, Form 8, etc. on the Ministry of Corporate Affairs (MCA) website? Considering I am in the start-up phase, there is no profit as such, so can I file these returns by myself without the help of any professional?

Ans: For filing the Forms on the MCA portal, you can visit the website and download the form with the Help option. It will give you step by step process and you can do the filing yourself off with the help of a Professional. 

8. Is it mandatory for a blogger to register under GST?

Ans: If the Aggregate Turnover of the blogger during a financial year exceeds Rs. 20 Lakhs (Rs. 10 Lakh for North East and the Hilly States) than he/she has to compulsorily get GST Registration done immediately. Also, kindly note that while calculating the Aggregate Turnover, export turnover is also included. 

9. Can individuals get their own GST registration done without forming a company? If yes, how to get the GST Number? Is it a simple Do it Yourself (DIY) Process?

Ans: Yes, you can take GST Registration on your Individual PAN. The person would be called a Sole Proprietor and the business would be called a Sole Proprietorship business.

Normal threshold limit for service provider under GST is Rs 20 lacs but if you are a blogger, YouTuber or related to any form of online business wherein export or import of services is involved, then you will be required to register under GST, even if your annual turnover is less than Rs 20 lakh.

The registration process under GST is pretty simple, actually. All you need to do is visit www.gst.gov.in and start the process (You can also get the pictorial step by step guide on that site). 

10. What can be the consequences if a blogger (earning and spending more than Rs. 1 lakh per month) is not having GST Registration?

Ans: Since the aggregate turnover is below 20 lakhs and assuming that the blogger is not located in a special category states as defined under the Act, there should be no consequence for not taking GST Registration. However, in case the bogger has paid GST on services availed or goods purchased that have been used in connection with the blogging business then he/she will not be able to claim GST Input Credit/Refund. 

11. If I am earning more than Rs. 20 lakhs through Google AdSense and the relatable business expenses are only about 5%, then in order to save income tax is it fine if I purchase new land or transfer some money to another person? How this will impact my tax return?

Ans: Buying land or any other property is an Investment, not a business expense. Also, giving money to someone, not in the nature of a business payment, can be treated as a Loan/Gift, etc., but not a business expense. For how to save tax, please refer to FAQ No. 2 above. 

12. Do we have to pay GST for the digital services payment received from a college which is an education trust and they don’t have GST Registration?

Ans: Non-registration of the college does not affect the GST chargeability for the person providing the services to such college. If a person having GST Registration provides any services, it does not matter whether the recipient of such services is having a GST Registration or not. The provider of such service will have to charge GST in the invoice, collect the same from the recipient (i.e. the college in this case) and then pay the same to the Govt. Similar question has been covered earlier in FAQ No. 5 above. 

13.  I have GST registration and I receive payments from outside India via PayPal. At the time of remittance, Paypal charges its commission plus GST. Now my question is that will I be liable to pay GST on the remaining amount?

Ans: PayPal charges GST on their Fees/Commission, etc only. That has no co-relation to the amount of GST payable by you on your sales. If you have GST registration, you will have to charge GST on your sales invoices and pay the GST to the Govt. In case of export of goods/services, you may apply for LUT/Bond and then export your goods/services without charging GST. In that case the remittances that you will receive from outside India shall not be liable to GST. 

14. Facebook Ads has started charging GST as they are now accepting payments in INR not in USD. So, whether I can get a refund of GST that I am paying to Facebook?

Ans: If you are eligible to claim GST Refund under the GST Regime, then you can claim the Refund for such GST payments made to Facebook as well. 

15. Is it mandatory for Indian E-commerce to register under GST?

Ans: E-commerce aggregators are responsible under the GST law for collecting and depositing tax at the rate of 1% from each transaction. Any dealer/trader selling goods/services online would get the payment after deduction of 1% tax.

All the traders/dealers selling goods/services online would need to get registered under GST even if their turnover is less than Rs. 20 Lakhs (Rs. 10 lakhs in case of special category states) for claiming the tax deducted by aggregators.

Note: Supplier of services, who is not supplying through an e-commerce operator liable to collect tax at source, having a turnover below threshold limit is exempted from obtaining registration under GST. 

16. I have 2 brands say AB & YZ. Do I need to have different GST registrations for both?

Ans: No, you need not have two separate registrations for two different brands. You can mention both the brands under Trade Name at the time of GST Registration. 

17. Whether buying a domain name is considered as buying an asset or whether it is considered an expense?

Ans: It really depends on the nature of business whether buying a domain will be considered as the purchase of an asset or as a business expense. In case you deal in the purchase and sale of the domain name and this is the major source of income for you, you can consider the domain name cost as an asset (Stock in Trade). Whereas, if your major business income does not consist of dealing with domain names, you should consider domain name cost as a business expense.

Also, please note that, if you buy Domain from any foreign provider for your business purpose e.g. GoDaddy, Dynadot, Namecheap, etc. you will have to get GST Registration compulsorily and pay GST under Reverse Charge Mechanism on such purchase. 

18. Can we get GST Registration done without any shop or particular place of business? If yes, how?

Ans: No, you will need a Place of Business without which GST registration is not possible. The place of business need not be a commercial establishment. You can get the GST Registration done at your residential address as well. 

19. For bloggers, what are the advantages/disadvantages of GST Registration?

Ans: Some of the advantages of GST Registration are as follows:

  • Most of the bloggers have advertisement income from Google Adsense. Hence, if they are registered under GST, they can easily claim a refund of Input Tax Credit which is otherwise not possible.
  • With the introduction of the GST Regime, most businesses prefer to collaborate with vendors having GST registration in order to claim the benefit of Input Tax Credit.
  • With regard to disadvantages, there is none except that there is a requirement of regular (monthly, quarterly, annual) compliances which people may find as a burden. However, it is always better to take some pain if you want to gain in your business. Therefore, having GST registration will always be a better option. 

20. It is compulsory to submit a Letter of Undertaking (LUT) in case of Nil GST, i.e. no GST liability due to no invoicing?

Ans:  LUT is a document to be submitted by an Exporter with the GST Dept, whereby the exporter undertakes the following:

a) Export of goods/services will be completed within a period of three months from the date of issue of Export invoice or further period allowed by the Commissioner if any; and

b) To abide by GST law in respect of exports; and

c) To pay IGST along with Interest if failed to export.

LUT has to be filed separately for each financial year. And, it has to be filed prior to the issue of an export invoice. Accordingly, if there has been no invoicing then there is no requirement of filing LUT as well. 

21.  As a blogger, do I have to file GST Return every month or once in a year? Can I file the return by myself or whether having a CA is necessary?

Ans: GSTR-3B has to be filed on a monthly basis as per the current procedure. However, GSTR-1 filing can be monthly/quarterly based on your annual aggregate turnover. If the annual aggregate turnover is above 1.5 crores the filing is monthly, else it is quarterly.

Annual GST Return filing is also to be done separately in Form GSTR-9. In case you fall under GST Audit, GSTR-9C will also have to be filed.

The GSTR Filings are simple and you can try to file them yourself as well. However, in case of GST Audit, you will definitely need the help of a professional. 

22.  As a blogger, do I have to file GST Return every month or once in a year? Can I file the return by myself or whether having a CA is necessary?

Ans: GSTR-3B has to be filed on a monthly basis as per the current procedure. However, GSTR-1 filing can be monthly/quarterly based on your annual aggregate turnover. If the annual aggregate turnover is above 1.5 crores the filing is monthly, else it is quarterly.

Annual GST Return filing is also to be done separately in Form GSTR-9. In case you fall under GST Audit, GSTR-9C will also have to be filed.

The GSTR Filings are simple and you can try to file them yourself as well. However, in case of GST Audit, you will definitely need the help of a professional. 


 

 

 

 

  

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