EFASAND: How to save or file Income Tax for Indian bloggers & Freelancers,Youtuber

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Saturday, 29 September 2018

How to save or file Income Tax for Indian bloggers & Freelancers,Youtuber

Income TAX

This is efasand present you the income tax solution if you are earning from internet or going to earn from internet, or you are thinking about this.


How to save or file Income Tax for Indian bloggers & Freelancers


Income Tax for Indian Bloggers

A brand new career path that has emerged in recent years blogs in which articles and blogs are being written. One important source of revenue for bloggers engaged in the blogging profession is through
  • Advertisements I.e ads
  • Affiliate Sales
  • Services like Blog Consultancy, Blog Designing, SEO Services, Content Services etc
  • Any other Source like Freelance income etc
The best thing about blogging is that it requires no age limit and you can earn it yourself. Many budding bloggers who earn good results from blogging are uncertain about paying income taxes from blogging in India. In this article, I will try to give an overview of how taxes are to be paid on blogging income.

Video for full solution

Taxes payable on Income earned from Blogging in India

Income tax and service taxes are payable on income earned by blogging in India. In this article, I would mainly focus on the way income tax is levied on blogging and I will try to explain the service tax on blogging in my next article. The method of calculating the tax on income was explained in detail below in this Article.
(Please Note: If a person is earning income from salaries/ rent / interest from bank/ capital gains computation of Tax payable on his Income won’t be done in the following manner. This article has been specifically directed towards explaining the manner of computation of income earned from any blogging and other online sources which form a part of income from any business or profession)Benefits of Filing Income Tax Return
The most important benefit of paying taxes and filing your income tax return is that only the income that you disclose in your income tax return is your real income. If you are required to show your income anywhere in the future, only the amount revealed in your income tax return is a valid proof of your income.
In addition, even if you apply for a bank loan, you are obliged to show them your income tax return and only the income disclosed in this income tax return is considered a valid source of income. Secondly, many expenses are incurred by the Govt. Like road construction, airports, etc. These expenses are incurred by the Govt from the tax collected.
 It is the Govt's legal right to collect income tax and, if you do not pay your income tax, you can receive a notice of scrutiny and demand that you pay your income tax along with interest and absolutely massive penalties.
Therefore, it is highly advisable for all income earning individuals to file their income tax returns before the due date with the Govt.
Computation of Income Tax in India
Any person earning income from any source is liable to pay income tax as per the tax rates prescribed by the govt. While computing the income on which tax is to be paid, the total of all Incomes earned by a Blogger are to be taken into account. You are requested to note that Income Tax is not payable on the Total Revenue earned but is payable on the Total Income earned. Total Revenue is the Gross Amount received and Total Income is the amount earned after Depreciation and Payment of Expenses incurred for the purpose of earning the Revenue.

Anyone earning income from any source is responsible for paying income tax in accordance with the tax rates prescribed by the Govt. The total income earned by a blogger must be taken into account when calculating the income on which the tax must be paid. You are asked to note that the tax on income is not payable on the total income earned but on the net income earned. The income is the gross amount received and the total income is the amount earned after the financing costs and payment of expenses incurred to earn the income.
The difference between Total Revenue and Total Income has been explained with the help of an example below:-
  • Total Revenue/ Total Turnover: Rs. 13,00,000
  • (Less) Total Expenses Incurred for the purpose of earning Revenue: Rs. 2,00,000
  • (Less) Total Depreciation on all Assets: Rs. 1,50,000
  • (=) Gross Total Income: Rs. 9,50,000
  • (Less) Deductions allowed for specified Investments: Rs. 1,50,000
  • (=) Total Taxable Income: Rs. 8,00,000
In the above example, income tax would be levied as per the income tax slabs on the total taxable income (i.e. Rs. 8,00,000) and not on total revenue (i.e. Rs. 13,00,000). The Income Tax Slab Rates keep changing are announced by the Govt in every budget.

Expenses allowed to be deducted while computing Income Tax


Deduction on INcome taxAny amount that was paid for revenue purposes may be deducted as an expense. Some examples of allowable expenses are as follows:- 
1. Expenses for domain hosting, 
2. Expenses for domain purchase,
3. Expenses for blog design etc. 
4. Expense of rent Expenditure on electricity / telephone / Internet Expense / Water Expense
5. Employee salary Freelance Consultants Payment Gasoline / Diesel Expenses Any other expenses incurred to earn profits
In this case, you are asked to note that only expenses incurred for earning revenue can be deducted as an expense. For example: If you invite a customer to a meeting in a 5-star hotel, you can deduct the payment to the 5-star hotel as an expense because this meeting would help you increase your business and earn extra income. Whether or not you receive additional business from this meeting is irrelevant, the point to be taken into account is that this expense was incurred in order to gain additional business.
However, if you go to a 5-star hotel for your personal purpose and not for business purposes, you would not be entitled to a deduction. 

You are also required to provide proof of such expenses for the purpose of claiming these expenses. You must therefore keep a file showing bills for all costs incurred.
Depreciation on Assets
Bloggers also buy certain assets in order to earn revenue. Therefore, in order to earn revenue, if you have purchased assets such as mobile / laptop / car / office furniture, etc., you can also reduce this expense for the calculation of total revenue. 

However, the benefit from the expenses incurred on the above assets would be more than 1 year, as these assets usually last more than 1 year. Since the benefit would exceed 1 year, the expenditure incurred is also directly linked to more than 1 year.
In such cases where the expense for the purchase of any asset has been incurred, you are not allowed to claim the entire expense at once. The total expenditure for the upgrade of the asset is allocated over the life of the asset and you can claim that expenditure in proportion to the life of the asset. This can be explained using the followingexample:-
For e.g.: If you purchase a laptop for Rs. 30,000 and the expected life of the laptop is 3 years, you cannot claim the whole Rs. 30,000 as an expense in one year as the life of the Asset is more than 1 year and this laptop would be giving you benefits for more than 1 year. In this case you would only be allowed to claim Rs. 10,000 (i.e. Rs. 30,000/3)
This method of claiming an expense proportionately based on the life of the asset is called asset depreciation. 
You must show us proof of expenses incurred in the purchase of assets by showing the required debts. 
Please note: the person can not determine the life of an asset himself, and the Govt has already defined the life of all assets.
Deductions allowed for Specified Investments
In order to support the habit of saving taxpayers and channel resources in the right direction, the Govt also allows the tax deduction of the amount invested only in certain investments. If a taxpayer invests in any of the investment options as specified by the Govt, the taxpayer is entitled to claim the deduction. The income tax would be levied on the amount received after the reduction of the gross total income tax deductions.
Deductions are allowed for investments made even in different instruments and the most popular forms of investment for claiming Deductions are mutual funds, PPF accounts, premium life insurance, premium health insurance, etc. The entire list of investments that could be claimed as a deduction.
Exemption from Payment of Income Tax
If the total taxable income allowed after the deduction of all expenses, depreciation and deductions is less than the minimum income taxable, the individual is not obliged to file his or her tax return. 
Under the current income tax slabs, no tax is payable if an individual's total taxable income is less than Rs. 5,00,000. Therefore, if the total taxable income after deduction is less than Rs, everything indicated above is deducted. It is not mandatory to file its income tax return for 5,00,000, and it is optional to file its income tax return for him.
In cases wherein it is optional for the taxpayer to file his income tax return and he still files his Income Tax Return, in such cases he will file an Income Tax Return stating that the Tax payable by him is Nil.
PAN Card for filing Income Tax Return and Payment of Taxes
In India, there are many people by the same name. Let’s take the case of Harsh Agrawal. There are many people in India by the name of Harsh Agrawal. So if Harsh Agrawal goes and pays his Income Tax, how would the govt come to know which Harsh Agrawal has paid the tax?
Every taxpayer receives a PAN card in order to avoid confusion. PAN card is an exclusive taxpayer no. Only 1 PAN Card No is issued per person and the PAN Card No is different for each Harsh Agrawal in this country and the Govt knows by means of the PAN Card No which Harsh Agarwal paid its income tax.
Each taxpayer must apply for a PAN card, and this application can also be submitted online. This is a one- time process and the PAN card that you have not been allocated would remain the same throughout your life. Applying for a Pan Card is a relatively easy process and can be done both online and offline. The PAN card application fee is very nominal and is Rs. Only 96.
The request for applying for a PAN Card is required to be made in Form 49A and online request for PAN Card No can be made through the TIN Portal on the NSDL Website. You are requested to note here that without PAN Card No. you cannot pay Income Tax.
Contrary to popular belief, I would also like to clarify that it is not necessary for you to apply for a PAN card at the age of 18. You can apply for a PAN card even before you are 18 years old and this income would be counted as your income and not the income of your parents, as you earn this income from your own ability.
Due Date for Payment of Income Tax
Each taxpayer must pay the income tax in the year in which the income is earned. The payment must be made in installments during the year if the total tax payable during the year exceeds Rs. 10,000. 10,000. 
Such payment of income tax during the year is called advance tax and due dates for the payment of advance tax during the year have been specified. The advance tax can be paid online through the submission of the required Challan form on the  NSDL Website.
The Due Dates for Payment of Advance Tax for all taxpayers (except Companies) is as follows:-
Due Date
Amount Payable
On or before 15th Sept
Not less than 30% of the Total Tax Liability
On or before 15th Dec
Not less than 60% of the Total Tax Liability
On or before 15th March
100% of the Total Tax Liability
Filing of Income Tax Return
At the end of the year, each taxpayer must submit a tax return. This tax statement is called the income tax return, which should indicate:- 
1. The earned revenues and the sources from which they are derived The costs incurred 
2. The depreciation of assets was claimed 
3. The investments that were claimed as a deduction Total taxes included. 
4. Advance tax paid or deducted from the TDS.
Delay in payment of income tax and filing of income tax return would impose a delay in levying interest and penalty. If a person has paid excess tax by mistake, he can also claim compensation of the excess tax paid.

Also read:
BUDGET 2019: Analysis

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