Tax Impacts on Income from Blogging

Since the arrival of social media, the need of bloggers and content creators is rising. The profession of blogging is not only popular because of the platform it provides for self-expression but also due to its lucrativeness. The income that a blogger earns is subject to tax collection as per the Income Tax Act. So today we are going to talk about the tax implications regarding the Income Tax Act and GST Act.

Meaning of a Blogger

The definition of a Blog as per the dictionary is a website that contains a writer’s or a group of writers’ individual experiences, observations, views, etc., and usually has pictures and links to other websites.’ So, a blogger is a person who posts new information on a blog on a regular basis. A blog is an individual source of content that showcases the writer’s experiences and opinions.

A Blogger’s Sources of Income

A blogger can earn money using various methods from the blog. Some of these methods are: Advertisements – Advertisements are the most prevalent method of gaining income for a blogger nowadays. The blogger can make money by the promotion of the products or services of a brand. One of the most famous ad networks is Google AdSense which gives great benefits to bloggers who provide ad spaces to businesses, every time someone clicks on the ads, the blogger gains income. Affiliate sales – In this method, the blogger embeds links of products or services in his blog that is related to those products and services. If someone goes on those sites using these links and buys the product or service, the blogger gains income. Paid review – Companies can go to a famous blogger and ask them for a paid review. The company then pays the blogger and the blogger publishes the review. Others – Other sources of earning money as a blogger can be Blog Consultancy, Designing of Blogs, Providing services related to SEO and Content, and freelancing.

Tax Implications

As we can say, blogging income can’t be easily classified under any of the Income heads according to the Income Tax Act. Consider the nature of blogging, the income can be placed in the head of Income from Business or Profession and will be treated as they are.

Income From Business or Profession

As per this kind of income according to the Income Tax Act, the taxpayer has to pay taxes on the income in profit and loss account after considering the aggregate income and the expenses and make the payment of taxes on the net income.

Allowable Expenses

As we have discussed before, the income from blogging is taxed as business income, and thus, there are some particular expenses that can be deducted. The expenditure can be deducted from the total income, and only the income that is left after the expenses will be taxed. The expenses that are deductible are:

• Expenses incurred for hosting the domain
• Rent expense.
• Expenses like electricity bills, telephone bills, etc.
• Salary to Employees.
• Remittances to freelance consultants.
• Enjoyment charges.
• Other expenses that are incurred for earning money.

You should bear in mind that the deductible expenses have to be incurred for earning income. The expenses incurred have to increase or assist the generation of income for the business. The blogger has to keep the bills and receipts as proof of expenses that he has incurred.

Depreciation

Just as a business entity, the blogger also buys assets that are needed for the operation of his business. If the blogger purchases assets like laptops, furniture, office tools, he cannot claim the full cost of purchases in the year of purchase. The price of the assets has to be divided among the lifetime of the asset. This division of the price of the asset among the lifetime of the asset is called Depreciation. Depreciation is a deductible expense too, and the blogger can deduct this expense from his Net Income.

Illustration

Mr. Guy is a blogger and he makes an income of 12,00,000 rupees a year from Blogging. After deducting the expenses that have been mentioned above, his Net taxable income becomes 5,00,000 rupees. On this income, the blogger can deduct any particular investments that are deductible and remit taxes on the amount that is left according to the Slab Rates of the IT Act.

Other Important Points:

The income tax has to be paid in the same year in which the Income was earned; that means the blogger will need to pay the tax in smaller parts if it is more than the maximum limits. This tax is called the Advance Tax.

• The blogger has to remit the advance tax within the due dates.
• The blogger has to submit the ITR inside the specified time and claim refund or remit balance tax.
• If there is any delay in the payment of income taxes, it will become the cause penalties and interest.
• If the blogger wants to file ITR, he will require a Permanent Account Number (PAN).
• The income tax regulations that are implied on bloggers regarding the blogging income is considered similar to a business owner earning business income. If the blogger receives any other income except the Income from blogging, then the rules of the IT Act will apply as per their own rules. The blogger has to remit taxes like Goods and Services Tax (GST), Tax Equalisation Levy and Tax Deducted at Source (TDS).

GST Implications

If we want to understand the application of GST, first we have to learn about the answers of some of the basic questions like if blogging is the supply of goods or services, how is the actual transfer of money, how is it supplied, etc. As per the 7^th section of CGST Act 2017, all types of supply of goods or services or both done or said to be done for consideration by a person in the operation or advancement of business are considered as supply as per GST. Bloggers provide services to advertisers by giving them a platform to showcase their advertisements. Thus, a blogger is a service provider as per the rules of GST. The exact form of services supplied by bloggers is considered as online information and services of database access or reclamation. The location of the services will be decided as per section 13(12) of the IGST Act. As per the regulation of section 13(12) of the IGST Act, the location of service of online information and services of database access or reclamation will be the place of the receipt of services. So, for instance, if the source of income is from Google AdSense, in which the location of the blogger is in India and the recipient, that is Google AdSense, is located outside of India, then in a scenario like this, the location of service will be considered as outside of India. The next thing that we have to consider is if the supply of service to, say Google AdSense, will be called an export of service or not. In order to determine that, we have to take a look at the five fundamental rules. If these five conditions are fulfilled, then it will be considered as export of service. The rules are:

• If the service provider is situated in India.
• If the service consumer is situated outside of India.
• If the location of service is not in India.
• If the remittance of the service is being received in foreign currency.
• If the service provider and the service consumer are not only the establishments of one particular person.

The answer to all of the questions mentioned above is affirmative in the case of a supply of services to Google AdSense. Thus, this service is considered as an export of service as per the rules GST. The next thing that we have to consider is the rate of GST that is charged on the supply of services by the bloggers. The location where services are provided plays the most important role in deciding the rate of GST for bloggers. If a blogger provides services to Google Ad Sense, etc. who is located outside of India or located in a Special Economic Zone in India, then that service will be considered as exported. And, as per the regulations of part 16(1)(a) of the IGST Act, the export of goods and services is called Zero Rated Supply. The meaning of this is that 0% will be charged for services like these if they are supplied by the blogger. A registered person that makes zero-rated supply can get his GST refunded according to either of the options mentioned below, according to the regulations of 54^th section of CGST Act:

1. The person can supply these services without payment of IGST as per the Bond or Letter of Undertaking and take the refund of input tax credit that has not been utilized
2. The person can supply while paying IGST on supply of goods or services – and get the refund of IGST that he has paid.

One thing to remember is that if the service provider exports the service, and would like to get the refund by choosing any one option mentioned above, then he must be registered under GST regardless of turnover. If the blogger supplies the services to an Indian business entity by running their promotional advertisement on his blog, then the recipient will be situated in India and 18% GST will be charged on this provision of services. Another question is regarding the Reverse Charge Mechanism (RCM) of the GST regime and if every blogger needs to mandatorily get registered under GST if he wants to comply with RCM. Usually, the person who supplies the goods and services has to pay GST. Though in certain cases like imports and various informed supplies, the recipient might have to pay the tax as per the reverse charge mechanism. The meaning of Reverse Charge is that the liability of paying tax is on the recipient goods or services and not on the supplier of those goods or services regarding the informed categories of supply. In law, two types of cases regarding reverse charge have been mentioned. The first scenario is based on the type of supply and the supplier. This case falls under 9^th (3) section of the CGST and SGST (UTGST) Act and also the 5^th (3) section of the IGST Act. The second case falls under the 9^th (4) section of the CGST and SGST Act and the 5^th (4) section of the IGST Act in which the supplies (taxable) by an individual who is not registered to a registered person is covered. An individual who needs to pay tax as per the reverse charge must compulsorily register under GST and the entry limit of 20 lakh rupees (the amount for North Eastern and hilly states that are considered as special category states is 10 lakh rupees) as a service provider, isn’t implied on them. An amount that has to be paid as per reverse charge will be paid by debiting the E-Cash Ledger. Liability of reverse charge can’t be set off by the utilization of input tax credit. Though after paying the reverse charge implication, its credit can be received by the recipient, if he is able to. If you want to include this information regarding all supplies attracting reverse charge it must be done individually in table 4B of GSTR-1. The advance that you pay for supplies under reverse charge is subject to GST too. An individual that makes pays in advance must pay tax as per reverse charge. All of this information is legal and hence might change as per time and the government’s preference, so it will be best for you if you consult an expert regarding all this information before taking any action. And also, this information was provided for educational purposes only and it shouldn’t be considered as legal or tax advice, as that would be bad for both the provider and the user.

Conclusion

Entrepreneurs have used content marketing to promote their businesses for decades, and tax blogging is now a good approach to create trust among audiences by providing high-quality content that they find useful. Bloggers and Youtubers have become the new full-time professions in India in recent years. These bloggers and YouTubers may earn thousands of dollars every month, but they may be unaware of the Indian tax structure that applies to their earnings and services. As a result, we hope that this post has answered all of your questions about blogging and Youtubers' professions, as well as how their earnings are taxed in India. Contact our legal professionals at Legalraasta if you have any additional questions or require additional information. If you are worried about GST as a business owner, please discuss the GST experts at LegalRaasta. You can get full help on GST Registration and GST Return Filing. You can also use our GST software for doing end-to-end GST compliance.