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Should Youtube’s Pay Income Tax in India for Adsense Earnings

YouTubers and influencers earning a gross total income in a financial year that exceeds Rs.1 crore are liable to get a tax audit done on their books of accounts. This limit has been increased to Rs.10 crore if not more than 5% of the aggregate of all payments received in that financial year is through cash.

Under the Income Tax Act, tax deducted at source (TDS) could also apply to payments made to YouTubers and influencers. The rate of TDS applicable will depend on the nature of the service rendered, or the type of transaction entered into.  

YouTube video blogging, popularly known as vlogging, is scaling new heights of popularity. The trend of googling for content has shifted to YouTube search. Many budding vloggers are making money from YouTube. However, most of us are not aware of the tax implications around it. So, let us try to explore this in detail.

YouTuber’s income is considered as business income. Being a service sector business, the assesses can only opt for normal provisions under the Income Tax Act, of 1961.

If the gross total income exceeds Rs 1 crore, then section 44AB i.e. tax of audit will be applicable to the YouTuber. All bookkeeping requirements will fall under Rule 6A and vlogger need to get their accounts audited by a Chartered Accountant (CA).

Section 44AB of the Income Tax Act deals with the audit of accounts of certain individuals. In other words, if certain individuals meet the requisites as prescribed under Section 44AB, then they will have to ensure that their accounts are audited by a certified chartered accountant.

However, if vloggers are opting for 44 AD presumptive taxation, then they are exempted from audit under section 44AB. The vlogger has to pay taxes on the net taxable income after considering all the business expenses and depreciation as per the income tax slab.

GST rate on income earned by YouTubers and bloggers

The GST rate applicable for services rendered by the YouTubers and bloggers is 18 percent (i.e., CGST of 9 percent and SGST of 9 percent or IGST of 18 percent).

YouTubers or other social media influencers can be viewed as entrepreneurs or freelancers. Hence, their income can be taxed as business income depending on the time and effort they spend on a day-to-day basis.

Some of these influencers also conduct online courses or one-off sessions for a certain fee. Hence, the question arises if they could be treated as professionals since this income could be treated as consultancy income. The question could be relevant because the limit for availing presumptive taxation schemes is different for a business vis-à-vis a profession. 

Similarly, the limit of tax audits is also different in both cases. However, if the time spent is relatively less, the income could qualify as ‘other sources’ income. In either case, the income shall be taxed at the slab rate applicable to the individual. Any expenses for earning such income can also be deducted to arrive at the net income that shall be taxed.

What about income of minors in this case?
The income of minors is ordinarily taxed in the hands of parents. However, in the case of minor YouTubers/influencers, it can be viewed as accruing to their own skills and hence shall be taxed in their hands only and not be clubbed in the parents’ income