Tax saving tips for Bloggers and Indian AdSense publishers


Are you a blogger or online publisher who earn lot of money through online publishing? Here are some tax saving tips to help you save your hard earned money.

As far as income tax is concerned, blogging and online publishing is just like any other business - we have to pay taxes for our earnings, if the income range falls in the tax brackets. However, many publishers are not really like the physical businessmen who are aware of the tax rules and other legal requirements to run a business. Many publishers are running blogs as a part time activity, along with their studies or primary job. In India, there are only a handful of professional bloggers and the rest are trying their luck through part time blogging or doing blogging as a full time job until they get another job!

More reading:

1. Is it worth doing blogging as a full time career

2. Should we pay income tax for AdSense income?

Tips to save taxes on AdSense or blogging income


Unfortunately, blogging income is no different from any other income. You are expected to disclose your online income in your income tax returns and pay taxes according to the tax bracket you belong to. There are many ways you can reduce your tax burden, which include getting Life Insurance, paying mortgage interests, participating in certain long term investment plans etc. Talking about general tax saving ideas is not in the scope of this article. I am sure you can find a lot of articles from Google to get tax saving ideas. The purpose of this article is to provide tax saving tips specifically for bloggers and online publishers.

1. In India, you are required by law to file income tax returns, if your total income during the financial year exceeds the basic exception limit (Rs 2 lakhs for general category of individuals). You must include your AdSense income and other online income in your tax returns.

2. If you are earning more than US$ 100 per month and if you expect your online business to grow, I strongly recommend you register it as a business. You may not be required to file tax returns and pay income tax but still running your blog as a registered business will help you in several ways.

3. If you make good online income, then you must open a "current account" in your bank, preferably in the name of your business. By using a current account, you are making it clear to the bank and other regulatory bodies that the income is from a business and thus you can avoid a lot of unwanted enquiries and questions from bank, income tax and enforcement departments.

4. Get an FIRC document for your online income, if the money comes from abroad.

5. If you operate your blog as a business, you can get tax deductions for a lot of expenses associated with your business. If you make purchases related to your online business, get the receipts in the name of your business. Even if you buy in personal name, you may be able to include some of your expenses if you have a strong case to prove they are business expenses. However, if you have a lot of money coming in, then doing lot of transactions in the personal name could invite many questions from income tax people.

5. If you are running the blogging business from your home, you can pay some rent to your parents (or, whoever owns the house). The rent amount can be deducted from your income while you file the annual income tax returns. However, the rent you paid will need to be included in the total income of your parent. This could add to the tax liabilities of your parent.

6. Certain category of income are eligible for service tax exceptions. Advertising income is one of them. If you classify your income as advertising income, you are not liable for service taxes for that portion of the income. Certain sources of income like sponsored reviews, paid articles etc can be classified in different ways since there is no exact category defined to match those. When you report such income to auditor, you may want to tell the auditor to show them as "advertising income" since they are sort of advertising. If you classify them as some other category, you may have to pay service taxes for them. (You still have to pay income taxes, irrespective of the category you choose). Use the purpose code P1007 when you receive advertising income in your bank account.

7. A portion of your expenses on telephone, internet, television, cellphone, news paper, magazines, cable TV etc can be considered as business expense, if you are using it in your home office. How much portion you can claim as deductions depend on how you use them and how comfortably you can explain to your auditor. Typically, chances of an income tax officer coming to your home and inspecting the use would be very low, but you should be prepared for that. If you claim 50% of those expenses as your business tax deductions, then you should be able to comfortably explain and convince your auditor and income tax authorities about the same.

8. If you buy computers, gadgets, cell phone, office furniture etc which help you in blogging, then you can claim those expenses as business expenses and claim deductions.

9. Do you review products? Are you buying products primarily for the purpose of reviewing? For example, if you are buying a book to review, then the cost of the book can be considered as business expense. There is no limit on what can be considered as business expense, if it is purchased for reviewing. You can purchase Diapers or baby food, as long as you have a blog dealing with such topics and you are publishing reviews of the same.

10. Some minor entertainment expenses can be included in business expense. For example, if you and your blogging friends go together to watch a movie to get some relief from long hours of work, you can claim deductions for it.

11. Do you treat clients in restaurants expecting to get some business? If you are a small blogger and do not deal with "clients" directly, don't worry. Your friends who could potentially help you grow your blogging network could be considered as potential clients and don't hesitate to take them for a lunch once in a while. Tax authorities will not mind such "treats" meant for the purpose of business promotion.

12. Do you watch movies? If you publish reviews of the movies you watch, then it is business and not entertainment!

13. Remember to get a receipt for all sorts of expenses related to your business. You will need them, in case you receive an unpleasant notice from the income tax authorities.

DISCLAIMER: I am not a lawyer or tax consultant. All the tax saving tips mentioned above are from my basic knowledge about the income tax rules in India and from my 15+ years of blogging experience. Your case may be completely different and my tips may not be applicable for you. Consult a tax expert or a chartered accountant for help.


Article by Tony John
Tony John is a professional blogger from India, who started his first Weblog in 1998 at Tripod.com. Tony switched to blogging as a passion blended business in the year 2000 and currently operates several popular web properties including IndiaStudyChannel.com, Techulator.com, dotnetspider.com and many more.

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Comments

Author: Amit13 May 2014 Member Level: Gold   Points : 6

Great article as always Tony,

My questions are related to the part where you state that expenses related to a blog can be deducted from AdSense income and thereby saving tax.

Q1. I make YouTube video reviews on gadgets, smartphones etc and earn income through AdSense. I run it on an individual basis and get my income in a savings bank account. Can I deduct the price I pay for these gadgets from my final annual income and pay tax on the rest?

Q2. If Yes, under what tax heading can I deduct the above as expenses?

Q3. An article explaining the benefits of running a blog/website/youtube channel for Adsense earnings under Business category would really help a lot of people like me. Do you think, in your free time you could write a short article on the same?

Would appreciate a reply to any/all of the above.

Author: Tony John13 May 2014 Member Level: Diamond   Points : 6

Amit,

You can deduct the expenses for review while filing your income tax. However, if you are handling it through your Savings account, IT department may ask you questions and it is better to do it through a business account. By doing all such transactions through a current account in the name of your business, you are making it clear that they are business expenses. When you do everything through a savings account, you will not be able to separate your personal and business expenses.

When your income related to business exceeds certain limits, you will be required to audit your transactions. If you are making good income from blogging, I strongly recommend you register it as a business to avoid legal complications.

What do you mean by "running a blog/website/youtube channel for Adsense earnings under Business category"? Did you mean a "Business AdSense account" or running blogs under a registered business entity?

You can claim certain types of expenses like depreciation of your immovable assets etc only if you are filing income tax as a business.

Author: Tony John13 May 2014 Member Level: Diamond   Points : 2

You can file the AdSense/blogging expenses as "Business/professional income", even if you file it as personal tax returns. You can still show business deductions, within certain limits. If you have a lot of transactions, I would still recommend you register a business for better branding and business promotions.

Guest Author: Kuldeep20 Jun 2014

How can we show the expenses we spend on freelancers? Like I hire most of the writers via Facebook and pay them via NEFT. Invoice of neft transaction will work as a proof of expenses?

Author: Tony John20 Jun 2014 Member Level: Diamond   Points : 2

Kuldeep,

Yes, you can use the invoice of NEFT transaction as proof of expense. Remember to keep record of all payments like name of recipient, date of payment, type of work, purpose, payee bank details, receipt etc. It will be required if you are audited by income tax department. You are supposed to keep them all for 5 years.

Guest Author: Kuldeep20 Jun 2014

Thanks for your quick reply Sir.

I have one more question may be it seems off topic.
I have a web design and online marketing company along with some blogs, I am not making good revenue from my company but making good income from blogs. My future plan is to take my design company to next level and my question is should I go for 2 different companies(one for blogs and one for design business) or only 1 company?
Your suggestions will be appreciated :)

Author: Tony John20 Jun 2014 Member Level: Diamond   Points : 0

Kuldeep,

There is no need to have 2 companies. Running a company has lot of overheads. So, just stick with one company for all your online business.



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