Are you An Affiliate marketer or Vlogger based out of India?
Are you looking for a proper Income tax guide to save money on your Blogging or affiliate marketing income in India?
Are you unsure about whether or not affiliate marketers need to pay taxes? This article serves as a comprehensive income tax guide for affiliate marketers and influencers to answer all your tax-related queries.
India is a country of Freelancers. most of professional works as Freelancer and earn income on outsourced work. As per the tax view there is no difference between Bloggers and freelancers.
Regardless of your source of income, you are required to pay income tax as per the country’s taxing rule. In India, any income above Rs. 3 Lakh is taxable for general taxpayers. If you work as a freelancer earning above the mentioned criteria, then you have to pay taxes. There are numerous ways to save taxes and this blog will help you with the same. It is advisable to take legal advice from a professional tax consultant to help you deal with the specific scenario.
Who is a Freelancer or Affiliate Marketer?
We live in an era where technology has taken over the world. And this has opened up a lot of opportunities to become self-employed. Today, a lot of people are heading towards making their careers as full-time content creators, affiliate marketers, influencers, etc., and becoming sole proprietors of their work. However, these influencers, freelancers, and affiliate marketers generate their revenue from content creation and affiliate marketing efforts which in turn makes it even more necessary to understand tax obligations that might occur in online businesses.
What is Income Tax?
Income tax is imposed by the government of India on the income earned by individuals, business owners, or affiliate marketers during the assessment year. The government uses these taxes to generate revenue and then later uses them for the development of infrastructures, healthcare units, the educational sector, and other welfare programs held for the goodwill of the country.
Taxable Income for Affiliate Marketers
Taxable income for affiliate marketers refers to the earning that they have made by working on the affiliate marketing platforms by selling digital products throughout the year. Whatever income is generated by these affiliate marketing efforts will be counted for taxation purposes. It is important that you track all your earnings and maintain a financial record (on books or digitally) to determine the taxable income.
Certain deductions can be done while calculating the taxable income as deductible expenses done during the work. All you need to do is to maintain all the receipts and other documents supporting your claims as this will help you get deductions on the eligible expenses.
Tax savings can be done once you understand what all deductions are eligible and it is important to take professional consultation to ensure that you get the full benefit of tax deductions. This will help you with tax savings with compliance to the tax regulations.
How to determine Total Earning as an Affiliate Marketer?
As an affiliate marketer or an influencer, it is very much important to keep track of your earnings as it will help you with the IT at the end of the assessment year. And you can track everything by maintaining a software or Excel sheet where you add details about each and every payment you receive and the expenses you have made for running your affiliate marketing campaign or another work purpose.
Tracking your earnings while running an influencer business or affiliate marketing industry and creating reports will help you understand whether you meet the tax obligations as an affiliate marketer or not. It is necessary to create a system where you update your income and expenses each month. As this will not only help you with the filing of your income tax return but you will also get a clear picture of how your work is growing every month.
What is Tax Liability?
Tax liability refers to the total payment owed by an individual, business, or affiliate marketer to the government in the form of tax. The tax will be payable to all the income you have made through running an affiliate marketing campaign, sponsored content, and other forms of monetization that takes place on your business. The amount of tax will depend on the total income earned and the tax rates charged by your government.
By keeping track of your tax liability, you can ensure that you meet the tax obligations and avoid any penalties or legal issues caused.
Self-employment tax is tax paid by individuals who are self-employed such as bloggers, influencers, and affiliate marketers, as they are not working for any firm for the long term. And they earn on a contractual basis.
As this tax is a combination of two types of taxes i.e., social security and medicare. In general both these taxes are paid by both the parties the employer and the employee but in this case, both parts have to be paid by the self-employed individual.
If you are self-employed and looking forward to filing the tax return then you must consider ITR-4 referred to as Income Tax Return-4 as this allows you to claim all the expenses that you have made during the process of earning by selling your service. This ITR-4 form lets you claim for the deductions, and all you need is to have a valid proof of the expenses that you have made.
Category of Income Tax
Income Tax in India is divided into five major categories, and everyone who falls under the category has to pay these taxes. Whether you are a resident of India or Abroad, if you fall under the category, then you must pay taxes. Here are the 5 categories under which Income Tax is divided.
- Property Taxes: If you own a property, some part has to be paid according to the market value of the property. Government is responsible for determining the market value based on the locality where that property is taken.
- Salaried Person: If you are earning a salary or getting a pension that falls under the Income-tax range, then you will have to pay the tax.
- Income from Business or Profession: If you are a freelancer, affiliate marketer, self-employed in any field, or a business owner, then you fall under the Income Tax criteria and you will have to pay some part as income tax according to the earnings you have made each year.
- Capital Gains: All the surplus incomes made by selling up mutual funds, stocks, and real estate properties, falls under the income tax criteria.
- Other Sources: If you are earning a passive income from other sources such as interest earned through bank accounts, fixed deposits, or any lottery wins, will fall under the category of taxable income.
Who needs to Pay Taxes?
Income tax is imposed by the government of India, it is charged on the income earned by an individual or businesses. Being in the profession of freelancer and affiliate marketer, you must consider some factors while deciding whether you need to pay taxes or not.
Any individual under the age of 60 who earns more than Rs. 3 Lakhs per year comes under the category of taxpayer.
In India, individuals, businesses, and freelancers are required to pay direct taxes on the income they generate per year. There are various factors that are kept in mind while paying taxes including costs, type of tax, exemptions, tax write-offs, and income. Disregarding the earning they are doing, they have to pay taxes as per the tax rates applicable for the particular income range.
Another exemption that freelancers and affiliate marketers get is in the form of foreign-earned income. Yes, you heard that right. Anyone getting income generated from foreign countries by the export of services in digital format may get foreign earned exclusion as a certain amount of income they have earned from clients living out of India from their taxable income.
For reference, keep in mind that tax filing fees may also be subjected to a deductible in the form of business expenses, which will also result in reducing your tax liability.
Below is the Income Tax Range for Freelancers below the age of 60 for FY 2023-24:
|Income Tax Slab||New Regime (With effect from 1st April 2023)|
|Rs. 0 – 3,00,000||Nil|
|Rs. 3,00,001 – 6,00,000||5% of the total income|
|Rs. 6,00,001 – 9,00,000||Rs. 15,000 + 10% of the total income|
|Rs. 9,00,001 – 12,00,000||Rs. 45,000 + 15% of the total income|
|Rs. 12,00,001 – 15,00,000||Rs. 90,000 + 20% of the total income|
|Rs. 15,00,00 and above||Rs. 1,50,000 + 30% of the total income|
Being a freelancer you will fall under the category of self-employed and this does mean that you will have to bear the self-employment tax. Do not forget that government does provide some income tax deductions to relax your pockets as a freelancer.
If you are filing your income tax for the financial year as a freelancer or blogger, you have eligible for deductions on business expenses and thus, you must take legal advice from your tax consultant to ensure you get full benefits on tax deductions.
What are the Exemption/ Deductions on Taxes Available for Affiliate Marketers?
Like any other individual or business owner, freelancers are no different. And thus, there are no exemptions for the personal expenses made by them. Below mentioned are some of the exemptions available for affiliate marketers.
- Working as a freelancer, you are allowed to claim deductible expenses that you have made only for the work.
- Every deduction will be provided with the receipts attached.
- Make sure you have supporting documents showing that all the expenses were made in the financial year.
These are a few perks of working as an affiliate marketer. You can save on your taxes by keeping track of your personal expenses and the expenses that you have made for work purposes. This will help you to save time and effort while paying your income tax. Also, below mentioned are some of the tax deductions and exemptions on Income tax that affiliate marketers/influencers can get.
Here are some of the applicable deductions/exemptions on Income Tax in India.
|Sections of the Income Tax Act||Deduction/ Exemptions|
|Section 80C||Provides you exemption of up to Rs. 1,50,000 on investments towards the ELSS, ULIP, Insurance, FD’s, and so on.|
|Section 80 CCD||Exemptions are provided for investing in government schemes run by Central Government.|
|Section 80 CCF||Exemptions allocated of up to Rs. 20,000 on investing on infrastructure bonds notified by the government of India.|
|Section 80 D||Deductions are provided for taking health insurance premiums.|
|Section 80 DD||Exemptions provided for the treatment of the disability|
|Section 80 E||Educational Loan|
|Section 80 G||Charitable Donations|
When you work as a freelancer, the tax payment becomes more complex and it’s necessary to keep records of your self-employed income that you have earned throughout the year.
Necessary Proofs for the Deductions Claim
As mentioned earlier, you will need to keep a record of everything claiming your deductions. Generally, showing bank statements or credit card statements does not work, and thus, you must keep records of –
- what you have purchased
- when you have made the purchase
- how much payment you have done
You must show proof stating that the purchases you have done are for the business or your freelancing work and not for your personal use. This will help you get the deduction claims easily.
Income Tax Owed on Profits
As mentioned above, income tax is any amount paid to the government based on the income generated by any individual or business owner. When it comes to affiliate marketers and freelancers, it is their responsibility to report any profits they have made on the money they have earned. The total amount of the income tax owed is decided based on various factors including the federal income tax rate and the growth of the affiliate marketers and the freelancer’s salary.
You can calculate the income tax owed on profits by any freelancers or affiliate marketers depending on the total income earned by working on blogs, affiliate marketing projects, or any other freelancer projects they take. All the profits are subject to the federal tax rate, which may vary depending on the income bracket.
There are many factors that are considered while withholding the taxes including tax write-offs, exemptions, business expenses, website hosting fees, advertising costs, equipment purchases, etc. It is necessary to keep track of these expenses to ensure you do the correct calculation of the taxable income while you are planning to file ITR.
This also requires you to keep a portion of their income throughout the year in order to cover their tax obligations. Freelancers and influencers can also pay advance tax so that they can make the tax payments quarterly and do not have to pay a lump sum amount at the end of the year.
What is Advance Tax?
Advance tax is the amount that is paid in installments to avoid loading at the last moment. If total tax liability is exceeding the slab rate of Rs. 10,000 for the financial year, then you may need to pay the tax amount every quarter. The sum paid in installments is known as the advance tax.
The total amount of tax payable is calculated after carefully adding the receipts, income in your savings account, property income, deduction of the expenses occurred during the freelancing work, TDS, etc.
If in any case, you fail to pay the advance tax, you may be imposed to pay penalty under sections 234B and 234C of the Income Tax Act. Below mentioned are the relevant dates for paying advance tax for the assessment year 2023-24:
|Installments||Due Date for AY (2023-24)||Total Tax to be Paid|
|1st Installment||15th June||15% of Tax Liability|
|2nd Installment||15th September||45% of Tax Liability|
|3rd Installment||15th December||75% of Tax Liability|
|4th Installment||15th March||100% of Tax Liability|
How to File for Income Tax as an Affiliate Marketer
If you are earning money through your affiliate business or freelancing, then you must check out how to file your ITR. Below mentioned are some of the steps to follow for income tax filing. You can use online portals to get the job done in no time.
Process of Income Tax Filing
- Visit the Income Tax E-Filing Portal.
- Go to Download and click on the ITR-4 form to download.
Fill out the form with all the necessary details.
(It generally asks for filling up some general information, your gross total income, details of income earned through business and profession, details of TDS (tax deducted at source), advance tax details, self-employment tax, deductions, and total taxable income, etc.)
- Compute tax using Form 26AS. You can claim exemptions and tax deductions by checking on all the sections that have various options available. You can select and file claims.
My Income Tax Experience with Affiliate Marketing
For Indian affiliate marketers and influencers, PAN CARD is very necessary to withdraw your Blogging or Freelancing Income. As per the (Reserve Bank of India) guidelines, Paypal (Online Payment transfer company) have asked all Indian users to submit their PAN card number and hence without a PAN card, no Indian affiliate marketer or freelancers can withdraw their money from Paypal. RBI
As you all know I am a professional Affiliate Marketer. I generate my income from Affiliate marketing and Blogging. Since I do not have a company registered for my Online Business, I have been paying taxes at the hugest bracket for every buck that I earn.
Although I have invested my money in some tax saving schemes but after a lot research I decided to to Recognize my finance from a little from Income Tax point of view.
Tax Guide for Affiliate Marketers
Here are some Tax saving tips for Affiliate Marketers and Freelancers based on some little information I have with respect to our Complicated Indian Tax rules.
Strategy 1 : If you are NOT in the payroll of any Government of Private organization and If you are generating significant Income via Freelancing or blogging then it is always better to register a company and report all your online income under that company.
This will help you to save tax showing your personal and official expenses under your Company. Major benefit of Having a Company for your freelancing or blogging business is that you can always save some tax towards general expense such as fuel, telephone bills, etc..
However there will be several responsibilities on you after registering your company, you will need to fill quarterly statements and IT returns in specific formats. You should only choose this strategy if you have a significant income from your Blogging or freelancing business.
Strategy 2: If you are Self Employed and there is only limited income then implement with this strategy. Say if you work on your own and there is limited income like you only generate some couple of lakh per year.
In this case you will need to File ITR-4 for reporting your online income. You will need to pay taxes for anything above the Income Tax exemption limit. Many of Indian Bloggers are only earning some limited income and hence this scenario ill suit you. You just need to file ITR 4 and report your all income in it.
Strategy 3: If you are employed yet you earn from Blogging or Freelancing as well. In this case you will need to file your income returns in ITR-4 format. (Business income reporting). many of professional are employed in a company and they also earn from Freelancing or blogging , this will be ok for you if your freelancing or blogging income is much lower than the actual pay of your regular job.
As compared with strategy 1 and 2 this is not a good route to proceed as you need to pay a lot of taxes and sometime you may come under scanner. You should take advise of Tax consultant before filling IT Return.
These were the highly researched taxing tips for Bloggers and freelancers. Check out which strategy suits you and then Implement on it. for limited earners Strategy 2 will be perfect bu you can’t save much tax via this route.
If you are earning high income from Blogging and thinking to grow your online business to next level then it is always better to register a company for your Business which will help to save a lot on tax.
Read more: Payoneer Back in India – Better the PayPal
FAQs on Affiliate Marketing Income Tax
What is a presumptive taxation scheme?
Under the presumptive taxation scheme, you do not need to maintain the accounting records. The income tax act says that under section 44AD, taxpayers can submit the receipts of net income in digital format and they only pay 6% tax on the income they have earned. While maintaining the records manually, the net income is considered as 8% of your annual turnover and thus, you have to pay tax on that 8% income.
Can a salaried person who also does freelancing in their free time avail benefits under the presumptive taxation schemes?
Yes, Income tax is applicable to both the full-time job and the freelancing income. One who has two income sources has to pay regular tax on their salary and get presumptive tax benefits availed on their incomes earned through freelancing.
As a freelancer, where do I get the information on TDS Deductions?
All the information regarding the TDS deduction is mentioned in the FORM 26AS.
(The 26AS form is a combined annual income tax statement that consists of all the details of the deducted tax at source, tax collected, any advance tax paid, along with the self-assessment tax.)
Do freelancers need FORM 16 while filing the Income Tax Return (ITR)?
Form 16 is generally issued by the employer to the employee when they file the ITR. Since, as a freelancer or affiliate marketer, you have multiple sources for the income earned. You will fall under the category of ‘business and profession’ and thus, you need to refer to the FORM 26AS for IT computation.
How to do the estimated tax payments every quarter?
It’s easy to pay the quarterly tax payments, all you need to do is to click on the IRS.gov website and choose the mode of payment including debit or credit card. You can simply click on the mode of payment and click on pay. You can also schedule your quarterly payment beforehand so you do not need to remember when your next payment is due.
What happens if I file my ITR after the due date?
If you file your ITR after the due date, then you will have to pay the penalty which is Rs. 5,000 for those who have income of more than Rs. 5,00,000 and it can go up to Rs. 10,000 if you file after the due date.
The last date to file ITR for the assessment year 2023-24 is 31st July 2023.
Some additional Income Tax tips
- Pay Advance tax so you can save some money on interest and Penalties on tax
- Track each and every income and expense carefully.
- Noting down Tax-deducted-at-source information and report it in your returns
- Saving money to pay Taxes without hassle.
As a newbie to the affiliate marketing industry and stepping out into influencer marketing, you might be excited, curious, and doubtful at the same time. you can make a lot of money doing affiliate marketing and at the same time, you need to be ready to pay all the taxes to the Indian Government. I hope this go-to guide has helped you with most of the questions running inside your mind related to Income Tax.
Affiliate marketers do not need to think about the income tax in their starting career, but as you cross the income criteria of Rs. 3 Lakhs, you must start maintaining records and take guidance from a professional tax consultant to get an idea of how much and when you have to pay the taxes.
That’s all on Income Tax Guide for Affiliate Marketers. If you have anything to add to the Income Tax Arena, comment down below to share your valuable knowledge. Also, if you want to know more, post your queries in the comment section below and I will try to answer all your queries. Do not forget to share this with friends or anyone who needs to know about Income Tax.
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