Many bloggers have questions about income tax on the income they generate from their blogs – whether its full time or part time. The confusion is compounded due to foreign sources of income like Google AdSense and PayPal. Here are some common queries and their answers.
For some time now, I have been getting income tax related questions from fellow bloggers. The confusion is mostly about earning a secondary income (part time blogging along with a job earning a side income) from blogs and its income tax treatment.
The problem gets compounded due to many non-traditional income sources like Google AdSense and PayPal.
Yes, it might get confusing at time. So here I am, answering questions asked directly by you.
Q. “I earn from Google Adsense. Google does not deduct any taxes while sending me the payment. So, am i really supposed to pay the tax over that income to Indian government ?”
Yes, if you are a resident of India, any income earned by you – whether within India or outside – is taxable in India. Since AdSense income is an income earned by you, you are supposed to show it in your income tax returns and pay tax on it.
Q. I work at a private company and do blogging as a part-time hobby. I pay tax on my job income. I am not making huge money from blogging at the moment, around 5k-8k/month as of now. I am thinking of ignoring to pay tax over that little extra income. I wonder if anyone from Income Tax Deptt. really care about my tiny side income ? Am i doing something terribly wrong. What’s worst that can happen to me ?
Q. “Is there any way to get rid of paying tax over my blogging income without getting into any trouble? What could be worse if i don’t tax on my blogging income? I doubt if anyone except me even knows about it. ”
Q. “I do blogging along with my day job. My company takes care of all the tax stuff and cuts the tax in advance before giving me the salary. Now, i am not a business owner, running some serious business and making huge money from it. It’s just blogging that i can manage to do from my laptop itself. I am thinking to skip paying tax on my blogging income. So,is it really a big deal for the government to scrutinize every single blogger like me and force me to pay tax?”
Any income you earn attracts tax. Therefore, you need to declare and pay income tax on any side income, however small.
The systems of surveillance are slowly being put in place in India, and tracing the flow of money is becoming easier for the tax man through PAN number, AIR (Annual Information Return), etc.
Thus, the possibility of an evasion being caught is quite high today. If caught, you would need to pay the income tax due, plus heavy penalty that can be more than the income hidden!
Q. “I am employed in a government PSU and have been blogging for a while. I have just started to make some money out of it but i am afraid if it is legal to earn from other sources(blogging) when i am already employed in a government PSU. And if it is not legal then why is it so normal for my colleagues(even my boss) to make side income from ‘Share market’ along with the job ?”
Most companies discourage alternate employment, and many discourage any sort of money-earning activity without prior written consent. As employers, the government and PSUs are quite rigid about this.
I am not aware of the exact rules (which would vary from one PSU to another), but in general, it is better to take prior consent from your employer if you are earning money from blogging. If it is related to your area of work in your company, the approval should not be difficult. (You can always convince them by saying that earning from a blog is like being paid for writing an article for a newspaper or a magazine).
Earning from the share market would be allowed in most companies because it is treated as “investment”, similar to investing in a bank fixed deposits and earning interest.
Q. “I have been blogging for over 3 years and it is only this year when i started making more income(2x or even 3x) than i earn from my job at the moment. I’m afraid my side income in this financial year will exceed my job’s income. Is everything all right with this. I mean, is everything legal with this ? I am absolutely ready to pay taxes on whatever income i am generating through blogging. I am just wondering if it is OK to have other income sources apart from having a regular job income ?
And when i will go on to pay tax on my side income (tax on salary is cut in advance by the employer) then will the IT Deptt. catch hold of me as they can track from my PAN that some tax was already paid to the government through my employer and now, i am paying more tax on some additional income separately?”
Please see the answer above.
As far as the IT department catching you for paying tax on an income over an above your salary, there is no need to worry. They are not concerned about the level of income from your job and any other income.
The very fact that you are paying tax on income over and above your salary would make them happy!
Q. “I am a part-time blogger and pursuing my MBA at the moment. I don’t have any company or something. It’s just me who blogs and i am able to make taxable income from my blogging. Which ITR form am i supposed to fill and submit. In near future, when i get myself employed somewhere, will i have to fill some other ITR form or the tax paying procedure will remain the same as it applies to me right now?”
Since blogging is not your profession, the income from blogging can be treated as “Other Income”. Therefore, you can file ITR1.
(If blogging is your full time profession or the income from it is a substantial part of your total income in the year, it would be treated as “Income from business or profession”, and you would need to file ITR4. Of course, you would also be able to claim many expenses as deductions – like domain name registration, hosting cost, etc)
Q. “I have some due taxes on my last financial year’s side income(from blogging) and just want to know everything i need to do for paying my due tax. Would love to have a step-by-step procedure for better understanding. It will be great if i could see some pre-filled sample of the applicable ITR form, assuming that the form has been filled by a blogger for paying tax on his blogging income. By the way, i have a job alongside and my taxes have already been deduced from my salary”.
This is really easy, and you shouldn’t be worried. Since blogging is not your primary occupation, the income from blogging can be treated as “Other Income” – just like interest received on bank fixed deposits.
So, add this income to your salary as “other income”, calculate your tax liability, and file your return! Of course, if the tax you are supposed to pay is more than the TDS (tax deducted at source) by your employer, you would need to pay the difference as self-assessment tax.
For detailed instructions on filling income tax forms, you can also read:
- How to fill Income Tax Return Form 1 (ITR1) – Instructions and Video Tutorial
- How to fill Income Tax Return Form 1 (ITR1) – Instructions
Q. “I have a day job that paid me Rs.3.05 lakhs in the year 2009-10. My company deducted all the applicable tax and there’s nothing due on that front. Along with it , i made some Rs.1 lakh from blogging and want to know just how much tax am i supposed to pay to the govt. Also, will i have to mention all my job income details(annual salary, tax already deducted, etc ) into the form which i will use to pay taxes on my blogging revenue”
You would anyway be filling out an income tax return and filing it. You just need to mention your blogging income as “Other income” in the form, and calculate your tax liability on your total income.
If the tax you are supposed to pay is more than the TDS by your employer, you would need to pay the difference as self-assessment tax.
To know how to calculate the income tax payable by you, you can read “Calculating your income tax liability – first step to saving tax”
Q. Out of all the money i earned through PayPal during financial year 2009-10, i didn’t withdraw it to my local bank account during that financial year, just kept it in PayPal. The majority of the earnings made during FY 2009-10 were finally withdrawn by me in the month of May this year.
Now, when it comes to paying taxes on the money earned through PayPal, if i look at my income from PayPal’s perspective, then i kept receiving money throughout the FY 2009-10 so it makes sense to pay tax on it this year itself.
But, when i contacted my local CA for guidance over this, he told me to NOT pay tax on PayPal income this year but rather pay due tax next year as the bank withdrawal happened in May 2010, i.e., FY 2010-11. In my CA’s viewpoint, Bank doesn’t know PayPal and bank would only consider income when money actually reaches bank account. And acc. to him, Tax authorities basically rely on bank, not stuff like PayPal.
My CA doesn’t have in-depth knowledge of PayPal and i am a new case to him as online money earner through PayPal so i am skeptical over his recommendation.
But on another note, the recent decisions made by PayPal such as forcing every indian to associate PAN with PayPal acc., choosing a “Purpose Code” while withdrawing money to local bank account, etc are indicative that Tax authorities want to track money that actually gets withdrawn to local bank.
As intended, i am ready to pay any due tax on me but i am perplexed whether i should pay tax on PayPal money this year or next year. I thought, you would be the best person to shed some light over the confusion i am having..
As resident Indians, we are expected to pay income tax on any income earned during the financial year – whether in India or outside. Whether you transfer it to your bank account or not, you did earn the income through PayPal. So, ideally, you should be paying the tax on it for FY 2009-10, and not FY 2010-11.
Your CA is right in a way that the tax authorities would know about it only when it comes to your bank (at least so far – with a PAN no. associated with PayPal account now, they would know anyway!). So, theoratically, you can defer paying tax till FY 2010-11.
But I personally recommend paying it for FY2009-10 (the return you would be filing now) to be on the right side of the law.