Foremost
thing of AdSense receipts for Indian residents is that the income is
taxable in India. It can be shown either under the head ‘Income from
Business or Profession’ or under ‘Income from other sources’. The
deciding factor in this case shall be the nature of work of AdSense
publisher. If he is maintaining the blog/ website on regular basis then
it can be shown under his professional income while if it is just a part
time job and receipts are low, the income can be shown under latter
head.
The
advantage with showing earnings under Income from profession is that
one can claim all expenses related to earning the income as deductions.
So, expenses like Telephone/ Broadband expenses, advertisement expenses,
books and magazine subscriptions, staff salary expenses, online
services, web design, traveling expenses among others would be deducted
from professional receipts reducing the tax liability. Apart from this,
one can also claim depreciation expenses on purchase of car, computer
and other capital items.
Regarding
the ledger head, under which AdSense receipts are classified the best
option is ‘Professional Receipts – Income from Website‘. There is no
need to mention the term Google AdSense in Balance Sheet or Profit &
Loss A/c but instead details can be mentioned in each narration entry.
Also, keep a stock of all counterfoils of cheques from Google and bank
account statements, so that they can used in case of scrutiny by Income
Tax authorities.
If you have misplaced the counterfoils that came with AdSense checks, print the statement of earnings from AdSense dashboard.
Another
issue that emerges from Google AdSense income is whether the receipts
should be shown on accrual basis or cash basis, since earnings for month
is normally credited after 2 months. For example, AdSense publisher ‘X’
earns $100 in month of March, then the cheque is made by Google around
end of April by converting the $ amount into Indian Rupees at the
prevailing exchange rate, which is then sent to the publisher’s Indian
address. So normally the cheque would be credited into publisher’s
account in May.
For
such cases, one can choose either of these two basis, but while
choosing cash basis, he has to make sure that only those expenses should
be claimed which have been incurred in earning income for that
particular month in which expenses are claimed, other wise those
expenses shall be disallowed by Income Tax authorities.
Google currently does not have a system of direct credit into Indian bank account unlike Paypal.
Why AdSense publisher is not liable to pay Service Tax?
There
are lot of doubts over whether Income from Google AdSense would
constitute payment of Service Tax @12.36% since online sale of space for
advertisement is taxable under Service Tax.
But
the issue is simpler than it seems. The liability of payment of service
tax lies with Google and not the blog/site owners. This is because it
is Google which sells the advertising space to advertisers through
Google AdWords at a rate which is known only to it and publishers only
get commission from Google.
As
per a ruling, Google is already liable to pay service tax on AdWords at
12.36% and if AdSense publishers also pay 12.36% on AdSense, then this
means a quarter of Advertisement revenue would to to the tax officials,
spelling a virtual killer for online advertising business in India.
Source: http://www.labnol.org
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