Filing Income Tax Returns For Bloggers And Freelancers

On 1st August, my husband reminded me that it was that time of the year when I would be filing my Income Tax Returns (for bloggers). I am sure everyone knows that the last date of filing income tax return for individuals is 31st July in India. However, the deadline for filing income tax returns for FY20 assessment year by individuals and certain non-corporate assessees is pushed back by one month to 31 August. 

He asked me to keep my my Bank Statements, Interest Statements, etc. for the previous financial year, that is FY18-19, in order. As a blogger and an influencer, whatever income I earn I file in my tax return. I am sure like me, many of you would be filing your ITR this month. If you are a blogger, but are not sure about whether you qualify for ITR, do read this useful guest post on How to file Income Tax Returns for Bloggers and Freelancers

Pay your tax now - Deadline for filing income tax returns in India

Deadline for filing Income Tax Returns in India for individuals

Understanding Income From Blogging And Freelancing

In today’s era, every business has to have an online presence. It means they need a blog that consistently publishes content. This requirement has birthed a new group of workers. These are freelancers who earn by blogging, content writing, or making creatives for publishing. The profession has grown so much in recent years that many bloggers and freelancers earn a handsome sum every year.

With income, comes the burden of paying your income tax. There the question arises what income tax is to be paid by bloggers in India? How is income tax levied on freelancers? How to do the tax return filing if you are a freelancer? In this article, we answer some of the fundamental questions connected to freelance income tax or income tax for bloggers.

Some key points, before we begin are:

  • Both service tax and income tax have to be paid on any income earned through blogging.
  • Source of income for freelancers includes services such as content writing, consultancy, designing, website creation; affiliate sales, adverts such as Direct Ad sales and any other source.

How To Compute The Income Of Bloggers or Freelancer 

When calculating the income of a freelancer, all incomes earned from various means are taken into account. The tax payable is on the total revenue and not total income. Total revenue is the amount left after all expenses, and depreciations suffered for the purpose of business have been deducted from the total income.  The example below will help you understand better the difference between total income and total revenue.

Let’s say as a freelancer your total revenue for the year was Rs. 12,00,000. You incurred expenses amounting to Rs. 2,00,000 for the purpose of business. You also had some assets in the business (like laptop and car) which depreciated over the year by Rs. 1,00,000. Then your gross total income becomes 12,00,000- 2,00,000-1,00,000 = Rs. 9,00,000.

This is still not the amount on which tax is paid. In case you have made financial investments, then those are deducted from the total gross income, too. Let’s say they amount to Rs. 1,00,000, then the total taxable income becomes Rs. 8,00,000.

When paying your tax as a freelancer, you will be considered in the Tax Slab that includes Rs. 8,00, 000 and not Rs. 12,00,000.

The next question is, what is defined as an expense? Any money that you pay during the year to earn more income can be deducted as an expense. A handful of things that can be marked as expense are:

  • Rent, electricity, telephone, water
  • Salary of employees or payments to freelancers
  • Internet bill, domain hosting or purchase, blog designing, petrol

Even taking out a prospective client to lunch is allowed as an expense because it was done for the purpose of earning an income. Professional legal service providers can help you through the entire process hassle free.

The Final Elements Of Computing Income Of Bloggers/Freelancers

Every business demands assets, and it is no different for freelancers. These assets depreciate or lose value every year. When calculating the total taxable income, these depreciations are allowed as deductions. How do you compute depreciation?

For example, you buy a high-end laptop to help set up your blogging business. The laptop costs Rs. 60,000. We assume that the lifespan of the computer is three years. Then you can claim depreciation of asset worth Rs. 20,000 in one year. Why twenty thousand and not the entire amount? Because the method assumes that the asset will give you benefits for more than one year. Therefore, the value you can claim is the total expense divided by lifespan (60,000/3).

The life of each asset is defined by the government and not by you. Therefore, keep it in mind when calculating depreciation. Moreover, always keep the bills as proof of each expense.

The last amount that is lessened from total revenue is investments, and the most common ones are

  • Mutual Funds
  • PPF Accounts
  • Life Insurance Premium
  • Health Insurance Premium

After deduction of the three categories, i.e., investment deductions, depreciation, and expenses, if the total income is lower than the Taxable Slab, then the blogger need not file their income tax return. If they still choose to do so, then the amount will be NIL.

Hope this post helped you understand how to file income tax returns for bloggers or freelancers. If you fall in any of the above categories, don’t forget, the due date of filing income tax returns is 31st August.

Blogger filing income tax returns for bloggers with pen and calculator

Filing Income Tax Returns for Bloggers and Freelancers

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