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Online businesses in India are growing at a very fast pace, while the earnings in the industry appear attractive. It is important to know certain tax regulations that apply to the amount of money made. While a lot of people are aware of income tax returns for individuals, they are not so familiar with working and earning money online in India. For more insights on income tax returns for individuals, you can check our detailed review on Taxguru.in
In 2021, the e-commerce market in India is currently valued at over $55Billion. With the success of this industry, there is a lot of growing interest in online earning businesses. Various persons and businesses are getting more involved in the buying and selling of goods and services online.
Some individuals believe earnings on the internet cannot be traced by tax regulators. This may be because money made via some methods like affiliate marketing, online cryptocurrency trading, or gambling tends to evade tax payments. Understanding the legality is vital before pursuing so always read trustworthy guides. For trading, it is always best to check with Government websites, but for gambling there is Asiabet. 
In this concise text, we shall point out the necessary levies to be paid when online earnings are made. You might be familiar with some, while others may be new to you.
1. Direct Taxes
This is the most common form in India. It is what is popularly regarded as income tax. Residents of India running online businesses or web stores are under the duty of paying 30% of the profits they make. This is provided under the Income Tax Act of 1961.
This is not just limited to individuals living in India, it also applies to those that have a business presence online in the country. Such businesses are duty-bound to pay 25% of the profits they generate. As for those permanently established, they are obligated to pay 40% of gains made.
2. Indirect Taxes
Erstwhile indirect tax laws like service, sales, custom duty, excise duty levies are now replaced with Goods and Services Tax (GST). GST is a destination based tax that means the goods or services will be taxed at the place where they are consumed.
Definition of electronic commerce is covered under section 2(44) of the CGST Act which means the supply of goods/ services (including digital products) over digital or electronic network. Amidst the COVID-19 pandemic, online selling of goods or services is one of the most popular mean to satisfy customer needs and generate income.
Online selling of goods or services is possible in various manner. Some are illustrated hereunder-
- Selling of goods or services via own website;
- Selling of goods via online e-commerce websites like Amazon, Flipkart etc.;
- Supplying of services via online operators like ola, oyo etc.;
- Only executing supply through other’s website. Here, payment is received directly not through the website.
Such supply of goods or services attracts GST. GST rates varies depending on the manner of selling/ supplying of goods and services.
3. Entry Tax
According to Bankbazaar, entry tax is the fee charged by the government for bringing a product into the state. It ranges between 5% to 10%; when goods are ordered online and are delivered into a state. The tax is to be paid by either the e-commerce site or the courier company.
4. Equalisation Levy
This levy was introduced in 2016. Where you run an online brand or webstore, and over the period of a year, you pay above Rs 1 lakh for business-to-business services or ad services; from a foreign company. It is compulsory for you to keep aside a 6% tax which you are to pay to the Federal Indian government.
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