If you are earning a big amount and also spending considerable amount on advertising, hosting for your blog than you must put it under Income from Business or Profession to get the deduction of these expenses. According to section 58 of Income Tax Act, 1961, no expenses is deductible from the Income from Other Sources.
Google Adsense is the biggest source of Income for every Indian Blogger, some blogger earns good while some struggles to meet their running expenses. But in between these one must not forget about the taxes on the adsense and other online income like affiliate income earned.
When you are earning online income like adsense there are two kinds of taxes that you need to concern about
- Service Tax
- Income Tax
Service Tax on Adsense Income
The sale of advertising space or time slots is included under (G) Section 66D of Finance Act, 2012.
The Educational Guide on Service Tax issued by the Indian Ministry of Finance on June 20, 2012, clarifies that Service Tax is to be levied on the sale of space or time for advertisement to be broadcast on radio or television but not on sale of space in print media, bill boards, buildings, cell phones, ATM Machines and Internet.
So even if your adsense income over Rs. 10 lakhs per annum (threshold limit of Service tax) irrespective of the currency in which you receive, you don’t need to worry about service tax but it is always advisable to get yourself registered with Service Tax if your earning exceeds the threshold limit of Service Tax Registration (Rs. 9 Lakhs).
Service Tax on Affiliate Income
The service tax is only exempted for advertising income but if you who are earning revenue though affiliate commissions (like Amazon Associates) or by providing other related services on the Internet, service Tax would be levied on all such services.
Moreover, service tax is levied on the Gross Amount Received rather than on the Net Income (i.e. Gross Amount – Expenses).
You can however claim Small Scale Service Provider exemption if the gross value of such services is less than Rs. 10 Lakhs. In other words, you are not required to pay any tax if the gross value of services provided by you is less than Rs. 10 Lakhs.
Income Tax on Adsense Income and Affiliate Income
You can declare these Income under two heads
1. Income from Other Sources
In case your earning from adsense or other online methods is not the main source of your income than you can treat it as a Income from Other Sources.
2. Income from Business or Profession
If your main source of income is online earning that you can show it under Income from Business and Profession.
Tip: If you are earning a big amount and also spending considerable amount on advertising, hosting for your blog than you must put it under Income from Business or Profession to get the deduction of these expenses. According to section 58 of Income Tax Act, 1961, no expenses is deductible from the Income from Other Sources.