Taxation of Digital marketing

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This discussion clarifies the taxation of digital marketing services, particularly for those using platforms like Google Ads. It explores whether such services fall under Section 44ADA (for professionals) or 44AD (for businesses) of the Income Tax Act. The consensus leans towards 44ADA due to the IT professional skills involved, with gross receipts being the total fee received, not just the net profit after paying advertising platforms.

Chitsimran Singh

Chitsimran Singh (Querist)
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25 December 2022 If a person provide digital marketing service through google ad, would this be cover under 44ADA or 44AD ?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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26 December 2022 Depending upon the professional qualification of the person, generally u/s. 44ADA...

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CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 December 2022 44ADA applicable in case of software professional providing such services.

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Chitsimran Singh

Chitsimran Singh (Querist)
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26 December 2022 The scenario is " Person takes Rs.100 fee from client for ad and pay google rs. 50 to show ad,
how would this work?
if 44ADA is used then 100 would be considered as gross receipt. ?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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26 December 2022 Correct..... add all such receipts to arrive at gross receipts for declaration u/s. 44ADA...

Chitsimran Singh

Chitsimran Singh (Querist)
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26 December 2022 isn't it a kind of business ? and not profession?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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26 December 2022 Though it seems to be a business, but it requires IT professional skill. Hence ITD has coded it under profession.

Chitsimran Singh

Chitsimran Singh (Querist)
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26 December 2022 it involve IT professional skill, but don't u think receipt (100-50) should be considered as gross receipt for 44ADA, (rs. 50 in above example). because Rs. 50 is being paid to google.
Person is just IT professional, google will advertise it.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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26 December 2022 Client pays it to you, and you pay it to google, so your receipt remains Rs. 100/-
If you manage to get google paid directly by client, your receipt can be said as Rs. 50/-
Better to file return under normal assessment, by getting books of account audited.

Chitsimran Singh

Chitsimran Singh (Querist)
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26 December 2022 yes, will have make such kind of planning.
Thanks for your efforts and replying my queries.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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26 December 2022 You are welcome...

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