Income Tax Implications on Earning from YouTube

The reach of social media has increased immensely across the globe, from urban to rural areas. It has been a career option for many people. In today’s world, YouTube is a remarkable source of income. An individual can earn money through content creation, such as vlogs, streams, sponsored ads, etc. People are generally confused if YouTube’s earnings are taxable. So, the straight answer to this is yes, the earnings from YouTube are implied for tax whenever you’re generating revenue or doing anything that must be reported to the tax authorities.  

Keep reading the article to learn how YouTube earnings are taxed, at what rate, about tax benefits, and more. It is important for creators to be well-known about their tax obligations and financial records to avoid the consequences that might affect them in the future.

How do Creators Earn from YouTube?

Creators have various sources from which they earn income from YouTube. Some of them are;

1. Advertisement Revenue– Advertisement is displayed in between the YouTube videos. This means creators are paid to promote the service or product via an ad. This is called advertisement revenue.
2. Channel Membership—Viewers have the option to pay more and become premium members of the creator. In return, the viewer will receive extra content and perks according to the type of content the creator creates.
3. YouTube Premium—It is a way to avoid seeing ads every time on YouTube. One can purchase YouTube Premium, and the creator gets a share based on how much the viewer engages with their content.
4. Merchandise Sale- Youtubers promote the merchandise brand. The more people buy the product, the more earnings they get.
5. Sponsored Content– YouTubers get paid directly by the company to promote their product.
6. Super Chats and Super Stickers—During livestreams, viewers can pay to highlight their comments to the creator. The creator gets over half of the payment, and YouTube takes some.

All of the above earnings are taxed.

Tax Applicability of YouTube Earnings

The tax Applicability of YouTube Earnings depends on two categories;

1. Income from Business and Profession—If you’re a full-time content creator, your income will be taxed under Income from Business and Profession. ITR-3 or ITR-4 can be filed depending on your finances. The tax rate is based on the tax slabs, which can be 5% to 30% depending on how much you earn. The expenses for running the channel can be deducted, for example, cameras, laptop tools, bills, etc.

• Income from other sources—If you’re a part-time content creator, your income will be treated as Income from other sources. Income is reported through ITR-1 and ITR-2. It is taxed under the tax slab. Fewer deductions can be claimed than income from business and profession.

Tax Slab Comparison (Old Regime vs New Regime)

Here given below is the table on tax slap comparison between the old regime vs new regime:

GST on YouTube Earning

If a creator’s income is less than Rs 20 lakhs annually, then there is no need to pay GST or register for GST. But if income exceeds Rs 20 lakhs, both GST payment and registration are mandatory. The standard GST rate for digital advertising services is 18%, split into 9% Central GST (CGST) and 9% State GST (SGST).

Revenue from Google AdSense and LUT

No GST is implied on the income from Google AdSense. However, LUT needs to be filled in the Income Tax Department for Google AdSense Income. It declares that you won’t be taxed GST on your income from Google AdSense.

LUT stands for the Letter of Understanding. It is necessary to ensure that you are obliged to GST regulations. This letter is applicable if the creator is involved in the export of services/goods and wants a refund of GST. The income from Google AdSense is considered as income from export services. Once the LUT is accepted, one can file for a refund of the GST paid on inputs used to generate AdSense revenue.

Tax Audit

The tax rules on the income from YouTube depend on how much the creator is earning;

1. Gross Total Income below 1 Crore—A tax audit is not needed for a gross total income of less than 1 crore. However, following standard tax procedures and maintaining financial records is important.
2. Gross Total Income above 1 Crore—If the Gross Total Income is above Rs 1 Crore, then, according to Section 44AB of the Income Tax Act, 1961, the account needs to be audited by a CA (Chartered Accountant).

Payment of Advance Tax

If the tax liability on YouTube earnings, combined with other sources of income, is Rs 10,000 or more, then the creator must pay advance tax. The tax is paid in 4 installments;

• 15% by June 15
• 45% by September 15
• 75% by December 15
• 100% by March 15

Tax on YouTube Earnings of Minor

YouTube doesn’t have an age limit for content creators, which is why several minor content creators earn a pretty good income from YouTube. The earnings are taxed in the minor’s name only rather than combined in their parent’s name, considering them personal income based on the minor’s skills.

Conclusion

Hence, you need to pay the tax if you’re earning money. So, YouTube earnings are also liable to tax. A creator needs to oblige with the tax. Better understanding helps you avoid the problems that might occur. Know if your income is treated as business income or income from other sources, and manage your earnings effectively. Complying with the tax rules enables you to enjoy and continue what you love to do.

Navigating the tax issues by yourself can be confusing, so connect to TaxEye for consultation by visiting the official website Taxeye

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