Salaried, resigned and started self employment in same fy

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Prasanth (Querist)
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01 April 2013 Dear Experts,

I was working as a S/W Engineer in a company till 21 Nov 2012. I started a website last year and started getting around Rs. 1 Lakh/month as advertisement revenue and affiliate sales commission from Sept 2012 from that website(mainly from US through PayPal and some cheques). Then, I resigned from my full time job on 21 Nov 2012 and started working on the website from home. My previous company deducted TDS properly and I will get Form 16 from them. I got around 3 lakhs as salary and 3 Laks from the website when I was working there. So, I think I can show the website income as income from other source when file return. My doubt is regrading Income Tax on the money I got after I resigned (around 6 Lakhs).

My questions are:

1. Whether I have to file both ITR-1 and ITR-4?
2. How can I save tax from both these incomes if I file it separately?
3. Is there any tax exemption on the income I got from oversees? (As I'm contributing something to our economy)
4. Can I deduct the expenses for running and maintaining the website from my revenue?

By the way, I'm planning to set up a start-up company withing the next FY.

Please guide me on this. Any resource for clarification will be highly appreciated.

Thanks in advance,
Prasanth

Anand

Anand (Expert)
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01 April 2013 Dear Prasanth
Congratulations on your venture.
1. At the moment you will have to file a single return in Form No. ITR 4. You cannot file separate returns for a single PAN

2. Question 2 remains moot, by virtue of answer to Q.1 above.

3. As a resident of India, you will be taxed on your Global income. There is no exemption available for contributing to economy, for the nature of work you are doing as it is advertisement & sales commission.

4. You can claim the expenses of running & maintaining the website from the revenue earned. This is an avenue of tax planning for you.

Apart from the queries raised by you note as under
a) Please consider the applicability of service tax to your case. As such i am not an expert on that front.

b) You should ideally consider the website income as income from business. You can claim depreciation on assets also apart from actual cash expenses

Hope this helps.

Message likes : 1 times

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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23 May 2013 I agree with the expert

Message likes : 1 times

Prasanth

Prasanth (Querist)
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22 July 2013 Thank you Anand for your expert advice. I have one more query. Can I fill ITR 4S and apply Section 44AD and show the Income @ 20%

Ref: http://www.indiantaxupdates.com/2013/03/04/assessing-online-income-us-44ad-in-india/

Somewhere I read that, "This section is not applicable to business man earning commission income or agency income." Is this applicable for me as I am not getting direct sales commission? I am getting online marketing revenue, through some quality price clicking calculation from eBay Partner network. It is not direct sales commission.

Is there any effect of Alternate Minimum Tax under Sec 115JC in my case.

Ref: https://www.caclubindia.com/forum/negative-implications-of-sec-44ad-249192.asp

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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22 July 2025 Hey Prasanth,

Thanks for sharing your situation—sounds like an exciting transition! Let me help clear your doubts one by one.

1. Do you have to file both ITR-1 and ITR-4?
No. You can file only one ITR for the financial year for a single PAN.

Since you have salary income + business income (website revenue), you should file ITR-3 or ITR-4 (depending on whether you want to declare actual profits or opt for presumptive taxation under Section 44AD).

ITR-1 is only for individuals with salary/pension and interest income and no business income. So, not applicable.

2. How to save tax on both incomes if filed separately?
You cannot file returns separately for the same PAN.

But you can consolidate all income heads (salary, business, others) in one ITR and claim deductions/expenses accordingly.

Expenses for running the website can be claimed against business income, reducing your taxable income.

Salary income is taxed as normal income.

3. Is there any tax exemption on overseas income?
As an Indian resident, you are taxed on your global income, including income received from abroad (e.g., US via PayPal).

There is no exemption just for contributing to the economy.

However, you can claim Foreign Tax Credit (FTC) if you have paid tax abroad on the same income (but mostly, ad revenue from US companies does not involve foreign tax deduction).

Also, if you receive income in foreign currency, convert it at the prescribed RBI rate on the date of receipt for tax purposes.

4. Can you deduct expenses for running & maintaining the website?
Yes! All expenses directly related to earning the website income are allowable deductions.

This includes hosting fees, domain charges, content creation expenses, depreciation on computer/equipment, internet bills, etc.

Proper records and invoices for these expenses are advisable.

Additional points you raised:
Applicability of Service Tax (now GST): If your turnover from website income exceeds threshold limits (currently ₹20 lakhs for most states), you may need to register for GST and charge it appropriately.

Treat website income as business income: This is recommended because you can claim expenses and depreciation, unlike treating it as “Income from Other Sources”.

Regarding Section 44AD (Presumptive Taxation):
Section 44AD is available for small businesses with turnover ≤ Rs 2 crore.

Commission income or agency income are excluded from 44AD under the proviso to Section 44AD.

Since your income is from affiliate marketing and ad revenue (which may be considered commission or agency income), Section 44AD might not apply.

However, since your activity is more like digital business, some experts argue it qualifies for 44AD; but the safest is to treat it as business income and file regular ITR-3, showing actual income and expenses.

Consult a CA to confirm for your exact nature of income.

Regarding Alternate Minimum Tax (AMT) under Section 115JC:
AMT applies to taxpayers having income from business/profession but claiming certain deductions or exemptions.

If you claim expenses normally and your total income is above exemption limit, AMT may or may not apply depending on your taxable income and deductions.

Usually for small businesses or new ventures, AMT is not triggered unless there are large deductions or exemptions.

Best to check after preparing your full return.

Summary for you:
Question Answer
File ITR-1 and ITR-4? No, file single ITR-3 or ITR-4
Save tax on salary & business? Claim expenses, deductions in one ITR
Tax exemption on overseas income? No, taxable as global income
Expenses deduction for website? Yes, fully allowed
Section 44AD applicability? Possibly no (commission income excluded)
AMT applicability? Depends on income and deductions

If you want, I can help you prepare a checklist for filing your return or even a draft ITR format. Just let me know! Also, good luck on the start-up venture — very exciting phase! 🚀

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