Income Tax For Bloggers

Income of bloggers engaged in the profession of blogging is through:
1.Advertisements
2.Affiliate Sales
3.Services like Blog Consultancy, Blog Designing, SEO Services, Content Services etc
4.Any other Source like Freelance income etc.

While computing the income on which tax is to be paid, the total of all incomes earned by a blogger is taken into account. However, 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.

The difference between Total Revenue and Total Income has been explained in the example below:-

Total Revenue/ Total Turnover: Rs. 12,00,000
(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. 8,50,000
(Less) Deductions allowed for specified Investments: Rs. 1,00,000
(=) Total Taxable Income: Rs. 8,50,000

In the above example, income tax would be levied as per the income tax slabs on the total taxable income (i.e. Rs. 8,50,000) and not on total revenue (i.e. Rs. 12,00,000).

Any amount which has been paid for the purpose of earning revenue is allowed to be deducted as an expense. A few examples of the expenses allowed are :-

1.Domain Hosting Expense, Domain Purchase Expense, Blog Designing Expense etc.
2.Rent Expense
3.Electricity Expense/ Telephone Expense/ Internet Expense/ Water Expense
4.Salary to Employees
5.Payment to Freelance Consultants
6.Petrol/ Diesel Expenses etc.

Interestingly, its Expenses Incurred for the Purpose of Earning Revenue that are allowed to be deducted as an expense. So,if you invite a client for a meeting at a 5 star hotel, the payment made to the 5 star hotel is allowed to be deducted as an expense as this meeting would help you in increasing your business and would help you earn extra income. It is irrelevant whether you get extra business from this meeting or not, the point to be taken into account is that this expense was incurred for the purpose of gaining extra business.But, if you go to a 5 Star Hotel for your personal purpose and not for business purpose, it would not be allowed to be deducted as an expense. So for the purpose of claiming such expenses, you are also required to provide proof of such expenses by maintaining a file showing bills of all such expenses incurred.

For the purpose of earning revenue, bloggers also purchase some assets like mobiles phones/ tablets/laptops/ vehicles/ office furniture etc. Bloggers are  allowed to reduce this form of expense incurred for the computation of total income.However, the benefit arising from the expense incurred on the above mentioned assets would accrue for more than 1 year as these assets usually have a life span of more than 1 year. As the benefit would accrue for more than 1 year, the expense incurred shall also be attributed to more than 1 year.In such cases where the expense has been incurred for purchase of any Asset, you are not allowed to claim the whole expense at one go. The total expenditure incurred for purchasing the asset is allocated over the life of the asset and you are allowed to claim this expenditure proportionately over the life of the asset. This can be explained with the help of the following example: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 give 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 proportionately claiming an expense based on the life of the Asset is called depreciation of an asset. You are required to show the proof of expenditures made on purchase of Assets by showing requisite bills for the same.By the way, the blogger can’t cannot decide the life of an asset by themselves. The Govt has already pre-defined the life of all these Assets.

To promote the habit of savings amongst taxpayers and to channelize the nation’ resources in the right direction, the Govt also allows for Deduction of amounts invested in specified investments. If a taxpayer makes an Investment in any of the Investment Options as specified by the Govt., he shall be allowed to claim deduction for the same. Income Tax would be levied on the amount so arrived at after reducing the Deductions from the Gross Total Income. The most popular forms of Investment for claiming Deductions are ELSS, PPF Accounts, Life Insurance Premiums, Health Insurance Premiums etc.

If the Total Taxable Income after deducting all expenses, depreciation & deductions allowed is less than the minimum income which is chargeable to tax, the individual is not mandatorily  required to file his Income Tax Return.

Every taxpayer is required to make payment of income tax during the year itself in which the income is earned. The Tax Payer is required to make the payment in instalments during the Year if the total tax payable during the year is more than Rs. 10,000.Such payment of Income Tax during the year is called Advance Tax and due dates have been specified for the payment of advance tax during the year. Delay in payment of income tax and filing of Income Tax Return entail having to pay Interest and Penalty for the delay. Also,in case a person has by mistake paid excess tax, he can also claim Refund of the excess tax paid.