Blogging and freelancing are one of the sources of income of many Indians these days. In this article, I have tried to give an overview of the liability of Income Tax for Indian bloggers and freelancers and the way Income Tax Return (ITR) is filed by a blogger or freelancer.
Of late, freelancing and blogging have become a source of income for a large number of individuals. The joys of not being confined to a cubicle and be your own boss are the major perks that are drawing a lot of people to blogging and freelancing. The best thing about this is that there are no age limits and you can work remotely from any location. With all these advantages, also comes the responsibility of filing the income as business and paying taxes. I have seen often bloggers and freelancers quite wary of filing their Income Tax Returns (ITR). I too had this dilemma last year whether to file my ITR for the income I got from blogging. So I decided to use my financial knowledge and help other bloggers and freelancers with this income tax guide.
Table of Contents
- 1 How can a blogger earn? Sources of income of a blogger
- 2 Do I have to pay tax on the income earned from blogging?
- 3 Why should I file Income Tax Return (ITR)?
- 4 How to compute income tax for Indian blogger or freelancer?
- 5 Here is your guide to calculate the income tax for Indian bloggers and freelancers:
- 6 Exemption from Paying Income Tax
- 7 How to file Income Tax Return (ITR) for Bloggers & Freelancers
- 8 Forms for Filing ITR for freelancers and bloggers
- 9 Due date for Payment of Income Tax
How can a blogger earn? Sources of income of a blogger
A major source of income for the bloggers engaged in the profession of blogging is through the following ways:
- Advertisements like Google Adsense and other Ad accounts.
- Direct Ad Sales
- Affiliate Sales
- Other freelance Income
- Services like consultancy, SEO services, content services and others.
Do I have to pay tax on the income earned from blogging?
If you are earning income from blogging, then you are liable to pay income tax on your blog earnings and service tax in India. Income tax is a statutory liability of those who make an income. Not only that, but you also have to file Income Tax Returns within time. It is a misconception that filing ITR is not important if you have already paid your taxes. Working as a full time as a blogger or freelancer requires a different approach for ITR filing. In this article, I would give an overview of how tax is levied on your blogging income and how you can file your ITR.
This article is specifically for computation of income tax of the income earned from blogging and other online freelancing sources which form a part of the income from any business or profession. If you are earning income from salaries/rent/interest from bank/capital gains, then computation of taxable income will not be done in this manner.
Follow our guide on how to calculate Income Tax and file ITR for salaried employees.
Why should I file Income Tax Return (ITR)?
As I said earlier, paying your taxes on time and filing your Income Tax Return is also a part of your constitutional duty. By filing your Income Tax Return, you are disclosing the amount you have earned in a financial year; and that will be considered as your true income. The amount disclosed in the ITR will be a valid proof for your income.
Also, if you wish to apply for a loan from a bank, then you will be asked to provide your income Tax return by the bank. Thus, it is advisable for you to file your Income Tax Return (ITR) before the due date.
How to compute income tax for Indian blogger or freelancer?
In India, a person earning income from any source is liable to pay income tax as per the income tax rates prescribed by the government from time to time. While calculating the income tax, the total income earned by the individual has to be considered.
Total income earned is different from the total revenue earned during the year. And income tax is payable on the total income earned. So you need to know what is your revenue earned and income earned. Total revenue is the gross amount received while total income earned is the amount earned after the payment of expenses incurred and depreciation.
This is how you calculate your Taxable Income:
Here is your guide to calculate the income tax for Indian bloggers and freelancers:
Step 1: Calculate your total revenue earned
As you know, the financial year starts from April 1 and ends in March 31. So for income tax purpose, you need to calculate the total income you earned / revenue earned / turnover made during the financial year.
Step 2: Calculate your expenses
As a full time blogger or freelancer, you are expected to run a business. So you must have expenses incurred for running your business. You are expected to pay income tax only on the net profit made during the previous year. Any amount that you have spent for earning revenue is allowed to be deducted as expense.
The following are allowed as expense:
- Domain hosting expense
- Domain purchase expenses
- Blog designing expense including softwares and subscription to online services
- Expenses incurred for taking up any course
- Rent expense
- Electricity, telephone, mobile, internet, water and other office expenses
- Salary to employees
- Payment to freelance consultants
- Travel expenses – The cost of travel to meet your clients within or outside of India is allowed as a deduction.
- Meal, entertainment or hospitality expenses – It can be claimed when you conduct client meetings or take your clients out for dinner or some other outing, and money has been solely spent with the intention of getting new business or retaining existing business.
- Any other expenses incurred for revenue earning
Please note that only those expenses incurred for the purpose of earning revenue are allowed to be deducted as an expense. For the purpose of claiming the expense, you also need to provide proof of such expense. So, please maintain a file with the bills of the expenses incurred.
Step 3: Calculate depreciation on assets
Bloggers and freelancers, for the purpose of earning revenue purchase fixed assets like laptop, mobile, car or office furniture. You can use the expense incurred for the purchase of these assets for the computation of income tax.
However, you can avail the benefit arising from the expenses incurred on these fixed assets for more than one year; as these assets will usually have a life span of more than a year. As you are using the benefit for more than a year, the expenses incurred will also be attributed for more than a year. In this case, you cannot claim the expense at one go.
See this for example
Price of a laptop : INR 30000
Expected life of the laptop : 3 years
Depreciation claimed for the laptop each year for 3 years : INR 10000 (30000/ 3)
This method of claiming expense based on the life of an asset is known as depreciation of assets. Here again, you have to show the proof of expenditures made on the asset.
Please Note: The government has already declared the life of an asset. Depreciation rates for different assets have been mentioned in the income tax act. You cannot yourself decide the life of an asset yourself.
Step 4: Deduct Expenses & depreciation from revenue to get net profit
Net profit = Revenue Earned – (Expenses + depreciation)
This will give you the net profit.
Step 5: Deductions allowed
To promote the habit of savings among the tax payers, the government allows for deductions for amounts in specific investments. The most popular form of investments are PPF accounts, Life Insurance Premiums, Health Insurance Premiums, certain Mutual funds etc. There is a list of deductions allowed under Section 80 of Income Tax Act athat applies on every individual calculating their taxable income. As a blogger and freelancer, you can avail these deductions.
Step 6: Now Calculate your Income Tax
Net profit – Deductions = Taxable Income
After you compute your liability, pay your taxes as per the current slab.
Exemption from Paying Income Tax
If your total taxable Income after deducting all the expenses, depreciation and deductions is less than the minimum exemption limit, then you are not liable to pay any taxes.
For FY 2018-19, the exemption limit is INR 250000. It means, if your income is less than INR 250000, you do not have to pay any taxes. In this case, it is also not mandatory to file your Income tax Return (ITR). However, as mentioned earlier, it is always good to file your ITR.
How to file Income Tax Return (ITR) for Bloggers & Freelancers
At the end of the year, every tax payer is required to file a statement of his taxes. This statement of taxes is known as the Income Tax Return (ITR).
If your taxable income post deduction is exceeding ₹ 250000, you have to file ITR. You can easily e-file your ITR online.
Delay in payment of income tax and filing of ITR could levy interest and penalty for delay. In case you have paid excess tax, you can also claim refund of excess tax paid.
Forms for Filing ITR for freelancers and bloggers
As a freelancer or blogger, you can file your ITR with Form 4.
If your income is more than one crore, then your account books needs to be audited as per Income Tax laws.
Due date for Payment of Income Tax
Every taxpayer is required to pay his income tax during he year itself in which it is earned. If the total tax payable during the year is more than INR 10000, then he has to pay the tax in installments. Such payment of tax beforehand is known as Advance Tax. There are due dates specified for the payment of advance tax during the year. You can do the payment of advance tax online by submitting the requisite challan form on the NSDL Website.
Due Date for Payment of Advance Tax :
Hope this guide on Income Tax for Indian bloggers and freelancers help you with your financial goals. If you have any questions, do comment below or drop us a mail.