If you are reading this article, then you are most probably a blogger or own a website and have certain questions in your mind on how to treat your income from Google ADS (Adsense) or any other AD network income with respect to income tax.
Don’t worry, we have answers to your queries. The main point to keep in mind is that whatever is the mode of income, it is taxable if you are a resident Indian.
Is income from Google Adsense Taxable?
Yes. Google is based in north America and issues your income cheques from America itself. You receive the cheque in India after the conversion of dollar amount to Indian rupee. The amount that you receive via this cheque is your income and is FULLY taxable.
Income Tax treatment of AD Income From Blog/website
There are two broad scenarios that you may fall into:
- Your main business is running your blog/website:
If blogging/website is your full time activity and your main source of income, then the income should be designated as “Income from Business or Profession” for income tax purpose.
This effectively means that you are running a business either as a company or a sole proprietorship. You are eligible to deduct all the expenses that you make to earn the income from ADS.
For example: You may be incurring costs on advertisement for marketing your blog/website, have some employees whom you pay salaries, travel frequently to attend conferences etc. All these expenses are your business expenses and can be deducted from your AD revenue before reaching at a net profit figure.
The income tax should be calculated on NET profit as per the relevant tax slab that it falls in.
- You work as an employee with a company, blog/website income is part time:
This is the most popular scenario and most of the bloggers fall into it. It never hurts to start a blog part time to earn a decent amount along with your regular job. But the income that you derive from this part time activity is also taxable.
If you are salaried, then obviously you receive your monthly salary after the income tax deduction. But, this tax is only calculated on your salary portion.
The best treatment of this part time income in tax books is to declare it as “Income from Other Sources”. This amount is added to your taxable income and the applicable tax is calculated as per the relevant tax slab.
Obviously, you are eligible to deduct any expenses that you would made to earn this income. The same example that I gave in above point is applicable here too. You should deduct all the expenses and then declare the NET profit figure as “Income from Other Sources” in your income tax return.
Your employer may or may not provide a provision to declare the “Income from Other Sources” to deduct the appropriate tax in advance. If it does, you will see the tax credit in your FORM 16 issued by your employer. Else, you need to declare this income in ITR (Income Tax Return) and pay the taxes.
- Google does not deduct taxes(TDS) while issuing payment to bloggers like Indian companies do for their employees?
No. Since there is no employer-employee relationship between you and the AD network company (Google Adsense in our case), they are not liable to deduct TDS. Also, they issues cheques from USA which does not come under Indian Income Tax laws. It is your responsibility to add this income to your total income and pay taxes to Indian government.
- I work in a private limited company and earn a very small amount like 3k-4K from blogging. Am I eligible to pay taxes?
It does not matter how much you earn from blogging. You should add the amount (whatever the amount is) to your total income and then find out the tax. It is possible that your salary taxable income falls under the exempted income and you are NOT paying any taxes in your company. But, if you add your income from blogging, this taxable income may cross the maximum exemption limit. In this case, you are liable to pay income tax.For example, lets say that your yearly taxable income in your job is 1,60,000 and you are a male. Then as per income tax slabs for year 2011-12, you do not need to pay any tax up-to 1,80,000 per annum.
You earn 3k per month from blogging after deducting all relevant expenses.
Now, adding this income i.e. 36,000 (12*3000) to your taxable income i.e. 1,60,000 take you above the maximum exemption.
New taxable income= 1,60,000 36,000 = 1,96,000
So, you need to pay tax @10% ‘education cess’ on 16,000 (1,96,000 – 1,80,000).
- Do I need to pay service tax on Google Adsense earnings?
No. You as a adsense publisher are NOT required to pay service tax. It is the responsibility of Google to pay service tax. You also do NOT need to apply for a service tax number.
I hope I have covered all the doubts related to ADS earning from Blogging/website. If you still have any questions, please write into comments and I will try to answer to the best of my knowledge.