Income Tax Implications on earning from YouTube

Introduction

YouTube Videos Blogging or commonly referred to as ‘’Vlogging’’ is emerged as a game changer in entertainment Industry. The effects are not only limited to entertainment industry but it is a source of Income for many. The concept gained momentum during Covid Pandemic when many vloggers entered in the Industry. People were sharing their beliefs, thoughts, experiences etc. The themes of YouTube channels range from Lifestyle, Travelling, Finance to Tax expertise. People are also earning good revenue from their YouTube channels.

So here comes the question of taxability of this Income. Many vloggers don’t focus on this aspect and end up receiving notices from Tax authorities. Through this article I would like to highlight briefly about the taxability of this source of Income.

Taxability of Income

Income tax Act divides all the sources of Income in 5 major categories-

• Income from House Property
• Income from Salaries
• Income from business and profession
• Income from capital Gains
• Income from other Sources

The Income from YouTube may be taxable under either Income from business and Profession or Income from Other Sources.

Income from Business and Profession

If you are dedicatedly engaged in YouTube Vlogging and it’s your main source of income, then you may offer to tax your income under this head. You will be taxed as Sole proprietor (means tax rate applicable on Individual). Else you make take registration as partnership, LLP or Company.

If your Income exceeds INR 1 crore, then you will be liable to tax audit (Audit conducted under Income Tax Act) under Section 44AB. The assesse is required to maintain proper books of Accounts. He can claim deduction for eligible expenses incurred during the course of earning revenue and tax will be applicable on Net profit.

However, there is a catch in Income tax. To avoid hardships to small businesses from maintaining books of Accounts and tax audits, the assesse may opt for presumptive taxation under Section 44AD if revenue is up to INR 2 Cr (INR 3Cr subject to a condition that 95% of the receipts must be through online modes). If this scheme is selected, then no deduction for expenses are allowed. Profits are presumed to be 8% of their total revenue (6% subject to a condition that 95% of the receipts must be through online modes).

For Example- Suppose total revenue from YouTube is INR 100 lakhs. Total expenses are INR 80 lakhs. Than-

Income from other Sources

If Vlogging is your part-time hobby and earnings are not much than you may offer to tax your YouTube Income under this head.

Income of Minors

Many Minors are also engaged in Vlogging. As a general sense, Income of minors are clubbed with Income of their Parents. However, if Income from Vlogging can be accrued to their own skills and talents, then it will be taxable in minor’s hand instead of their parents.

Advance Tax

Many times we forgot the concept of Advance tax while making all calculations. If tax liability is greater than Rs. 10,000 in a year, then we are liable to deposit advance tax. This can be explained as per below example-

Suppose your Income tax liability for FY 2024-25 is going to be Rs. 20 Lakhs (you have to make calculations to calculate tax liability in advance)

Note: In case Advance tax is not deposited, assesse will be liable to pay Interest u/s 234B & 234C.

Conclusion

Through this article I have tried to cover some of the Important aspects in case of earnings from YouTube.