Indian Bloggers, professionals and website owners are earning income through sale of advertisements via Google’s AdSense program. But being a new income head, there has been confusion over the tax treatment of such earnings.
Google Adsense 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.
If you are an adsense publisher from India and paying income tax – you can share your experience here, this must be helpful to all Indian adsense publishers a lot.