How to Pay Income Tax on your Adsense Income in India?

When you receive your first check from Google Inc. prepare your heart to give away a hefty percentage of it in Income Tax. Yes, I know it hurts. I recently got a check of $3222 (Rs. 1.55 lac) and given the tax situation that I am in, I have to pay over $1000 (Rs. 50K) of it in taxes. Thats life ! In this post I will outline what I have found regarding paying your Income tax on Adsense Income, especially in India.

No matter where you are located, I think there are no clear tax rules specially meant for blogging income. You can either show it as an income from a profession or small business (in United States) or show it as a personal income from other sources. All I will say about paying taxes on Adsense income in United States is that making your blogging a 'small business' has tax advantages.

Ok, now back to the point. Income Tax on Adsense Income in India. Here is what you need to know.

1. Income from Profession or Income from Other sources? You can either declare your Adsense income as an income from a profession (fill ITR-4 in this case) or income from other sources (fill ITR-2, unless you have to fill ITR-3 or ITR-4 for other reasons). I do not think of my blogging activities as a profession, so I am going to stick to ITR-2, although I have been told it is better to declare it as a profession. Better in what sense? I have no idea.
   
2. Pay Advance taxes: Adsense income is not exactly predictable. However you will have to pay Advance taxes. You can pay them online. The deadlines for non-corporates to file advance taxes are as follows :
   

   On or before the 15th September Not less than 30% of your income tax.
   

   On or before the 15th December Not less than 60% of such advance tax, as reduced by the amount, if any, paid in the earlier installment.

   On or before the 15th March The whole amount of such advance tax as reduced by the amount or amounts, if any, paid in the earlier installment or installments:

   Depending on your preference, you may want to pay a little bit of more advance tax in order to avoid fines and interest or you may want to avoid paying excess tax and if required pay interest/fines on it.
3. Auditing of Adsense Income : If you are earn over Rs. 10 lac in a year in Adsense and are showing it as a profession, you will have get an Audit done by a Charted Accountant. If you are showing it as income from other sources, I have no idea if Auditing is required. I am in the process of finding out and will update this post as soon as reliable information is available.

Good Luck with your Taxes !