Income Tax Applicability on Income from YouTube

Income Tax Applicability on Income from YouTube

Any income received in India including income from YouTube and other sources, is subject to Income Tax in India. This income tax is charged if the income earned by the person exceeds the prescribed limit.

What all can be the sources of Income from YouTube?

For a person earning through YouTube, the following can be his sources of income:
– Payment from YouTube on the basis of reach, comments and views
– Advertisement revenue from YouTube
– Consultancy services on YouTube like video making, designing or optimizing
– Income from YouTube as a Freelancer

Applicability of Income Tax on Income from YouTube

As per the provisions of the Income Tax, the person who is having income from YouTube can be taxed as a sole proprietor unless he registers his business as company, partnership firm or Limited Liability Partnership firm.

Treatment of Income from YouTube

The person having income from YouTube can treat his income either as “Income from Business or Profession” or “Income from Other Sources

Income from Business or Profession

The treatment of income from YouTube can be treated as Income from Business or Profession, in case the person considers YouTube as his full time activity or main source of income. The person can claim deductions on expenses and depreciation on capital expenditure. Further, in cases of losses, he can also carry forward it for a subsequent period of 8 years by filing his Income Tax Return before or on due date.

Also Read: Can I file Income Tax Return after the due date?

In order to claim the expenditure, the person is required to maintain proper books of accounts.

For example,
Sharukh earned Rs. 20 lacs (after TDS) during the FY 2021-22, through his cooking channel. He incurred the following expenditure to earn this income:
Marketing expenses: Rs. 1,00,000
Advertisement expenses: Rs. 50,000
Workshop expenses: Rs. 5,00,000
Internet expenses: Rs. 15,000
Camera (capital expenditure): Rs. 3,00,000
Computer (capital expenditure): Rs. 2,00,000

Since, camera and computer are capital expenditures, only depreciation can be claimed as expenditure:
Camera = 40% x 3,00,000 = Rs. 1,20,000
Computer= 40% x 2,00,000 = Rs. 80,000

Total expenses are as follows:
Marketing expenses: Rs. 1,00,000
Advertisement expenses: Rs. 50,000
Workshop expenses: Rs. 5,00,000
Internet expenses: Rs. 15,000
Camera = Rs. 1,20,000
Computer = Rs. 80,000
Total = Rs. 8,65,000

The Net Profit made by Sharukh after setting of the above expenditure of 8,65,000 is Rs.11,35,000. His Income Tax liability will be computed as per the Income Tax Slab and the tax regime opted by him.

Alternatively, the person can make use of Presumptive Taxation Scheme under Section 44AD of the Income Tax Act. He can declare 6% of gross receipts ((as receipt is through electronic medium) as Net Profit. Further, the books of accounts are not required to be maintained, if presumptive taxation is opted and deduction on expenses can be claimed.

a. The person cannot opt for this scheme if the gross receipts from YouTube is more than Rs. 5 cores (Rs. 10 crores, w.e.f., AY 2022-23)

b. If the person makes loss in any year and opt to file returns under normal provisions, then he can’t use this option for a period of 5 years.

Further, if his gross total income exceeds Rs 5 crores,  then he has to maintain proper books of accounts and get them audited by a Chartered Accountant under section 44AB of Income Tax Act,1961. However, if he is opts for 44 AD presumptive taxation, then he is exempted from Audit under section 44AB.

Also Read: Income Tax Audit: Small Taxpayers Or Presumptive Income

Income from Other Sources

If the person’s income from YouTube is not much or if he considers YouTube as his hobby, then he can choose to show his income as “Income from Other Sources”. If the person chooses to show his income as Income from Other Sources, then he can claim deductions only on expenses but not on capital expenditure under Section 57 of the Income Tax Act.

For example,
Salman is employed in a Private Limited Company and earns Rs. 1,00,000 per month. He is fond of traveling and has started a travel vlog. He uploads travel vlogs every weekend and made Rs. 2,00,000 during the FY 2021-22. Further, for his travel blog, he incurred an expenses of Rs. 50,000 attributable directly for making the videos (excluding capital expenditure). Here, he can show Rs.12,00,000 under Income from salary and Rs. 1,50,000 (Rs. 2,00,000 – 50,000) from Income from Other Source while filing the Income Tax Return(ITR). Tax shall be computed at applicable rates after considering allowable deductions.

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