Tax Assessment Guide For Adsense & Online Income in India 2015

Guide For Indian Bloggers and online entrepreneurs. Maintaining your Expenditures in Account books and Income Tax Returns. How to reflect Income from Adsense and other Online Publishing/Advertising sources properly in Accounts/Income Tax Return.
This article describes the best way to manage your Adsense & other online publishing advertising incomes from tax point of view. Bloggers and other Online entrepreneurs who are earning money online by providing certain online services, Blogging, or Selling virtual/Physical products throughout India or outside of India.

income tax india

Following are discussed in this article:

A. Case 1: If You are Selling Goods/Products Online : Sales Tax or GST
a) Interstate Sale
b) Intrastate Sale:
c) International Sale:
B. Case 2: If you are Earning Money Online by Providing Services: Service Tax
a) Domestic
b) International:
C. If you are Earning Money From Blogging : Income Tax
D. Two Ways to Declare Income In Account Book :
E. Income Earned from Google Adsene is Taxable?
a) In case of Individual
b) In Case of Company or Firm
F. Most Obvious & frequent Official Expenditures:
G. Quick Notes:

A.  If You are Selling Goods/Products Online :

Sales Tax or GST
a) Interstate Sale: When buyer & seller are located in different states, then CST (Central Sales Tax) charges are applied on Goods, the application of rates of CST (i.e 1%/2%/4%/12.5%) will depend on the type of good.
b) Intrastate Sale: When Sale or purchase is made within a state, the Taxes will be charged on Goods as per the Local Sales tax in that state law.
c) International Sale: when you are selling Goods outside the country, then it will be termed as Export of goods, and all export sales are exempted from Sales tax.

B.  If you are Earning Money Online by Providing Services:

Service Tax

Service examples- accounting, consultancy, education, transportation. For instance, webmasters who are providing online platform for buyers and sellers of goods and services, are charging service fee for the usage of such platform service and hence are liable to pay service tax.
a) Domestic: If you are providing any service with in Indian Taxable territories and the service which you are providing are not in Negative list then It’s service provider’s duty to collect service tax from customer and pay it to Govt. Service Tax is payable only after an yearly service turnover of 10 lac or more.
b) International: Service Tax is not applicable for International services, hence No service Tax Levied on Adsense Income or Freelancer Exported Services during 2014-2015 Financial Year.

C. If you are Earning Money From Blogging :

Income Tax
Reflecting Adsense and other Online Incomes in Account book or Income Tax Return.
According to Indian Income Tax Act there are 5 heads of income. Earned Income has to be mentioned under one of these heads mentioned below while filing Income tax Return.
i. Income from salary
ii. Income from house property
iii. Profits and gains of business or profession
iv. Capital gains
v. Income from other sources
Find Detailed Information about: 5 heads of income in the Indian Income Tax Act Here.

D. Two Ways to Declare Income In Account Book :

1. When main source of income is blogging & other online activities: The Income from Google Adsense or Other Online Sources is to be declared as “Profits and gains of business or profession” in your Accounts and In Income tax Return.
This is called- Income from Business or Profession.
2. When you have Salary as primary income and secondary income from Google Adsense & other such online sources: in this case declare your online income as “Income from Other Sources” in Tax Return.

E. Income Earned from Google Adsense is Taxable?

Income Earned from Google Adsense is completely taxable in all cases – it is earned by either Individual, or firm, or company.adsense tax questions and doubts
a. In case of Individual: Individuals have to pay Income tax only when his/her total income for current financial year (2014-2015) is more than Rs 2,50,000 after deduction of allowed expenditures (those costs which individuals spent specifically to generate that Income or Revenue).
b. In Case of Company or Firm: There is no Slab rate for company or firm. For all profits made by your company in a given financial year, you have to pay Income Tax at the rate 30% + 3% cess.

Profit = Total Income – Expenditure
Find Income Tax Slabs & Rates for Assessment Year 2015-16: Tax Slab Rates India

F. Most Obvious & frequent Official Expenditures:

• Internet Bill
• Electricity Bill
• Rent
• Hosting & Domain
• Advertisement expenditure
• Travelling expenditures
• Car & Bike Maintenance Expenditure
• Fuel Cost
• CA and Other Professional Consultancy Charges
• Office Furniture
• PC, Laptop, Printer, & other equipments’ Depreciation which are already procured.
• Daily Office Expenditures- Tea/coffee, refreshment for visitors, etc.
• Office Maintenance Expenditures
• Staff Salary

G. Quick Notes:

1. For every expenditure, that you want to show in your accounts you must have a Bill or some other payment proof to maintain your records properly. For instance, for a single cash payment greater than 5000 you should take signature of payee using Revenue Stamp on payment slip.
2. If you are buying an item for your office having value more than Rs. 20,000, then you must prefer cheque payment or payment through NEFT. Cash Transactions above Rs. 20,000 are not allowed against official expenditures.
3. Don’t Give or Take Loan in Cash more than Rs. 20,000. Otherwise you will attract Income Tax Penalty.
4. Use Daily Book to Note daily expenditures. You must maintain payment registered properly which must support/match expenditures you have mentioned in your Income tax return or Account books.

  • iqbbalahmed

    I like it.

  • Raja

    We are from India and we are getting Adsense amount Monthly.
    Can you please tell how to show this adsense in our financials accounts.
    Should we generate any invoice, in the name of Google, for the records ?
    Please explain in detail

    • Admin

      Hello Raja
      You Can Show All Adsense income As – Income From Business. ( No Service Tax is levied on Adsense income Due to you getting money in your Bank as Foreign Convertible currency. ) This is Business Income as Individual & Tax Rate would be as Normal Individual rates.
      You Can Show All expenditure Incurred to earn that adsense income. It may be Salary to other, Hosting, Expert Advice paid, Rent, Electricity bill, Broadband Bill, Furniture Depreciation, Laptop or PC Depreciation, So on.
      You Will Get all Invoices from your Adsense Account in Payment History. Ya Take it and Maintain your Records.
      Also Maintain Bank Statements in Records. Use Tally to Maintain your Account.