Wednesday, January 15, 2020



Blogging as a full-time profession has been growing rapidly in India with people from all spheres of life creating their own blogs. A major reason for the increasing shift towards professional bloggers is that the self-satisfaction related to doing something of your own and also the monetary income which comes mainly from Google Adsense.

In my earlier guest post for ShoutMeLoud readers, I wrote a piece of writing on overview of tax on bloggers and freelancers and this text I might mainly be that specialize in Income Tax on Adsense Income only. I’m assuming that the majority of bloggers don’t have much knowledge about the manner of computation of tax and that I would be explaining everything from the essential and an attempt to simplify everything as much as possible.

Page Contents

  • Income Tax on Adsense Income
  • Computation of Total Income from Adsense
  • What is Depreciation?

Income Tax on Adsense Income

Firstly, it's important to notice that only tax is levied on Adsense Income in India and no other tax like Service Tax, VAT, GST, Excise Duty, etc is levied on Adsense Income. Earlier, Service Tax was levied on Adsense Income but now No Service Tax is levied on Adsense Income. Irrespective of what proportion you earn, Service Tax won’t be levied on Adsense Income in India.

Before explaining the way of levy of tax on Adsense in India, a blogger needs to know the concept of monetary Year. Income Tax in India is levied on the yearly income earned by an individual during a fiscal year. The fiscal year in India starts from 1st April and ends on 31st March. Therefore,

Financial Year 2013-14 would be from 1st April 2013 to 31st March 2014

Financial Year 2014-15 would be from 1st April 2014 to 31st March 2015

The total income earned from Adsense and other sources during a fiscal year would be added up and tax would be levied as per the tax Slab Rates effective. The tax Slab Rates are announced by the minister of finance within the Budget and keep it up changing per annum. The current tax slab rates are mentioned during this link: tax Slab Rates for the years 2013-14 and 2014-15.

Once you've got computed your total annual income from Adsense and other sources, you'll also make use of varied tax calculators that are available both within the web interface and as mobile apps. The most popular web-interface tax calculator has been prepared by the Tax Department itself and may be accessed from this link. The ICICI Bank tax calculator mobile app for Android and iOS is additionally good just in case you favor to use the calculator as an app on your mobile.

Computation of Total Income from Adsense

To provide services to the advertiser, you'd have incurred some expenditure also like Hosting expenses, telephone expenses, internet expenses, etc. Therefore, the quantity received from the advertiser isn't your income, it's the Revenue. Income is the net amount that you've got earned after deducting expenses and depreciation. (The concept of Depreciation has been explained below in this article.)

There is no pre-specified set of expenses that may be claimed. Any expense incurred by you for earning revenue or has the potential of helping you in earning future revenue is often claimed as an expense that can cause a reduction of total income resulting in a reduction of taxes payable. I’m creating an illustrative list to help bloggers understand the nature of expenses which can be claimed:-

  • Hosting Expense
  • Domain Renewal Expense
  • Telephone Expense
  • Internet Expense
  • Electricity expense
  • Salary Expense
  • Website development expense
  • Fuel expense
  • Meeting Expense
  • Content writer expense

This is only an illustrative list and there are often many such expenses that are allowed to be claimed. After computing the entire annual revenue, total annual expenses and total annual depreciation, the income would be computed within the following manner:-

  • Total Annual Revenue xxx
  • (Less) Total Annual Expenses (xxx)
  • (Less) Total Annual Depreciation xxx
  • (=) Total Annual Income xxx

What is Depreciation?

If for providing your services, you've got purchased a laptop worth Rs. 50,000 and installed internet connection on an equivalent @ Rs. 1,000 pm, these are to be subtracted from the entire annual revenue. The amount spent monthly on the internet connection is an expense of recurring nature and may be shown as an expense as explained above.

However, the quantity spent by you on purchasing a laptop may be a one-time expense and therefore the expected lifetime of a laptop is typically 2 years. Therefore, the laptop becomes your asset.

Over two years, your laptop efficiency will keep it up reducing gradually and after 2 years, it'll require a change. This gradual effect of reduction within the value of your asset is named depreciation.

As the expected lifetime of your laptop is 2 years, you can't allocate this cost to just one fiscal year. this may be allocated over 2 years and therefore the formula for an equivalent is as follows:-

  • Annual Depreciation = Total Value of the Asset

Total lifetime of the Asset

Therefore, the value of the laptop would be allocated over 2 years i.e. Rs. 50,000/2 = Rs. 25,000. This Rs. 25,000 is that the depreciation on laptop per annum for two years after which you'll need to purchase a replacement laptop.

Depreciation is levied on all assets which have a lifetime of quite 1 year. Some samples of assets on which bloggers usually claim depreciation are mobile, laptop, desktop, furniture, cars, etc.

Filing of Tax Returns

Once you've got computed your total annual income and therefore the tax payable thereon, you'd be required to file a press release with the tax department showing the way of computation of income and therefore the tax payable thereon. This statement is named the tax Return and is required to be filed per annum. All Incomes from Blogging and other online incomes (incl. Adsense, Affiliate, Services, etc) are required to be disclosed under the head “Profits or Gains of Business or Profession” and you'll submit this information in either ITR 4 or ITR 4S.

The last date for filing the tax return is 31st July which comes after the top of the fiscal year. Therefore, for the fiscal year 2013-14, the last date for filing a tax return is 31st July 2014.

However, just in case you've got an enormous business and your annual revenue is quite Rs. 1 Crore per annum, you'd be required to urge your tax audit conducted by an accountant and therefore the last date for filing tax returns during this case would be 30th Sept.

Although the returns are required to be filed just one occasion during a year, tax is required to be paid in 3 installments within the same fiscal year during which the income has been earned. The payment of tax in installments within the same fiscal year during which it's earned is understood as Advance Tax.

The procedure for payment of taxes and filing of tax returns is now fairly convenient as everything can now be done online.

Income Tax could also be a wide gamut of complications and there may be some intricacies involved within the computation of tax on Adsense. For the aim of simplicity and a better understanding of the concept of tax, I’ve only given a summary of the computation of tax on Adsense Income.

  • Do you get to pay tax on Adsense Income?
  • Yes

Do you get to pay a service tax in income from AdSense?

AdSense income after 1st October 2014 will fall under the service tax category.

If you're not much comfortable with tax, it's always advisable to consult a CA. A CA usually charges Rs. 15,000 to Rs. 30,000 for little business. The rates increase because the scale of business increases. However, before approaching a CA, you ought to even have some basic knowledge of tax which is explained above.

Also read:

  • An Infographic of Indian Professional Bloggers
  • Blogging in Indian society and the way you'll bring change
In case of any queries concerning levy of tax on Adsense Income and other Advertisement/Affiliate Incomes, please leave your queries them within the comments below and that I would be happy to assist.

Sharing is caring

1 comment: