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Income Tax on Content Creators & YouTubers - Is Section 44AD applicable?

CA Raghav Khandelwal , Last updated: 15 June 2024  
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Introduction

With new times, new businesses and new ways of doing old businesses do emerge. One such area and industry is content creation. In this article, we will explore the income tax compliance that needs to be done by content creators.

Income Tax on Content Creators and YouTubers - Is Section 44AD applicable

Sources of income

Typically, content creators have the following sources of income:

  • Ad Income
  • Brand Income
  • Affiliate Income
  • Merch Income
  • And in some cases, stock and rental incomes.
 

Treatment under the Income Tax Act

Many people usually show content creators income under 44AD by showing 6% (usually everything is through online channels). Section 44AD specifically excludes businesses with commission income. Hence, it should not be shown under 44AD. Usually, there is commission income for YouTubers, which is reflected in 26AS u/s 194H as well.

There is one more view in other industries where commission income is shown under head income from other sources, and hence 44AD is opted in; however, considering the frequency and nature of the income, it should not be reported under head income from other sources.

 

So it should be reported under the regular scheme by preparing a profit and loss account. Corresponding expenses to income like depreciation on equipment, digital media marketing, ad expenses, travel and refreshments, merchandise purchase or labeling, staff expenses, etc. should be kept in record, and accordingly, taxes should be calculated.

Depending on the nature of the entity, the tax rate has to be decided. It is worth noting that when the estimated tax liability is more than $10,000 per year, advance tax also has to be paid in installments of 15%, 45%, 75%, and 100%. In the next article, we will talk about GST for content creators and YouTubers.

The author is a practicing CA and can be reached at ca.khandelwalraghav@gmail.com.

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Published by

CA Raghav Khandelwal
(Practising: GST & International Taxation)
Category Income Tax   Report

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