Service Tax on Online Income through AdSense, Affiliate, Referral and Freelancing Services

 tax on online incomeI have been into blogging field for past 3 years and being a member of lot of Blogger Groups on Facebook, Digital Point, Warrior Forum, etc., I find lot of Indian bloggers who earn online income asking few questions on their tax liability and this has made me to write an article on the same. I am going to cover only service tax part in this article and would soon cover the income tax part as well.

Let’s breakdown all the possible sources of online income into various logical clusters wherever necessary for the purpose of the service tax.

(If you have income of different nature other than that mentioned below feel free to comment with few details and I would be happy to answer)

Advertisement Income From Various Companies Like:

  1. Google Adsense
  2. Chitika
  3. Infolinks
  4. Buy/Sell Ads
  5. Clicksor
  6. Bidvertiser
  7. Technorati Media
  8. Direct Ads (Not a company)
  9. Others

Any income you earn from displaying ads on your website/blog from any of or any combination of the above mentioned companies irrespective of whether it is in India or Foreign or Quantum of Income, they are exempted from Service Tax since the same has been included in Negative List which contains all such service which are exempt from service tax. For your reference, it is included in clause (vii) of Section 66D of the Finance Act which states that:

“Selling of space or time slots for advertisements in print media, bill boards, public gates (including stadia), buildings, conveyances, cell phones, automated teller machines, internet, aerial advertising are not taxable”

Conclusion: As far as the income from displaying ads on your website is concerned irrespective of any other factor, you need not collect and pay any service tax. Just forget about paying any service tax on such income.

 

Affiliate Income and CPA Income which is in nature of commission from Various E-Commerce and CPA Firms like:

In general, affiliate income is the next big source of income for many bloggers although because of the choice of niche few bloggers blog on, there are bloggers who earn 10 times more through affiliate sales than they earn from ads. Most bloggers earn affiliate income from following companies:

  1. E-Commerce Sites:
    1. Indian Companies
      1. Flipkart
      2. Amazon India
      3. e-Bay India
      4. Others
    2. Foreign Companies
      • Amazon
      • e-bay
      • ClickBank
      • Others
  • Hosting and Domain Registrar Companies:
    1. Indian Companies
      • Bigrock
      • Others
    • Foreign Companies
      • Hostgator
      • BlueHost
      • GoDaddy
      • iPage
      • Others
  • CPA Companies like:
    1. Indian Companies
      • vCommission
      • AffiliateVia
      • Others
    • Foreign Companies
      • Others

Depending on few factors, service tax is applicable in few cases, now let’s see the cases where service tax is levied on such income and where it is not.

The reason I have broken down the source of affiliate income into Indian Companies and Foreign Companies is that Services Tax is based on place of service provided/consumed. Services which are provided inside the Indian Territory other than in the state of Jammu and Kashmir are alone taxable under service tax. So let us see what that means to you:

  • Affiliate income you earn from foreign companies are not subjected to service tax.
  • Affiliate income you earn from Indian companies are subjected to service tax, but don’t worry you may have an escape route if you are a small service provider where you need not pay any service tax.

 

    • If you are a small service provider i.e., if your aggregate total taxable services (what is aggregate total of all taxable services?) in the Current Financial year and 
    • In the Previous Financial year,
    • Individually does not exceed Rs. 10 lakhs (e.g., 8 Lakhs in last Financial Year and 9 Lakhs in Current Financial Year). Then you need not pay any service tax.
    • But if your aggregate total taxable services (i) exceed Rs. 10 lakhs in the Current Financial Year or (ii) It exceeded 10 Lakh in the previous financial year, then:

(I) If it exceeded 10 Lakhs in the Previous Financial Year:

You need to pay service tax from 1st rupee that you receive in the current financial year.

e.g. If your total taxable services amounts to Rs. 11 lakhs in the previous financial year and Rs. 3 lakhs in the current financial year, then in the current financial year you need to pay service tax from the 1st rupee you receive from the taxable services you provide , in this case the service tax amount comes to (3,00,000*12.36/112.36) = 33,000/-

(ii) If it was less than 10 Lakhs in the previous financial year and Exceeded Rs. 10 Lakhs in the current financial year then

You need to pay service tax on income exceeding Rs. 10 Lakh

e.g.: If your total taxable services amounts to Rs. 9 lakhs in the previous financial year and Rs. 12 lakhs in the current financial year, then in the current financial year you need to pay service tax for the amount exceeding 10 lakhs i.e., Rs 12,00,000-Rs 10,00,000=Rs 2,00,000, in this case the service tax amount comes to (2,00,000*12.36/112.36) = 22,000/-

Dilip Kumar

+Dilip Kumar (Author and Editor of The Tax Info) is a Chartered Accountant from Hyderabad, Loves Blogging on Tax related matter.

You can Subscribe for his updates on Facebook & Google+

 

One thought on “Service Tax on Online Income through AdSense, Affiliate, Referral and Freelancing Services

  • October 14, 2013 at 2:13 pm
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    hy dilip sir ,

    can u tell me if we earn from forex online affilate commissions from internet sites . will we be liable for service tax or income tax …?

    And the 2nd question is whether forex trading in india is illegal or not …? i heard that rbi is strict against the people who trade in forex through online foreign websites

    Reply

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