Tax Compliance for Bloggers, Domainers, Online Service Providers and Online Entrepreneurs

From the last few months, I was being approached by Bloggers, Online services providers, and entrepreneurs about basic info on taxation and rules. What I found that most of them lack the fundamentals and common rules about taxation. Hence I decided to come up with this article on common rules and information on taxation in India.

* Here I must disclose that I myself providing Domain Registration services at BookYour.in

Who Should File Income Tax Return:

India’s Financial Year (FY) runs from 1st April to 31st March

If Total receipts OR revenue is > 2.5 Lakh RS. in any Financial year, You must file Income tax return towards the end of the year.

Point To Remember: It’s “Total Receipt”, not profit. Per Example: Your total receipts in a Financial Year is 4 Lacs but profit is only 50 Thousand RS, you are still supposed to file the Income Tax Return (but not necessarily any tax liability will occur).

Who are Liable For GST:

If your total receipts in the Financial Year crosses 20 Lakh Rs., you must register and charge your clients accordingly for GST, regardless of the country. Your receipts may be Local or international.

Again, this is receipts, not profit. A company, as well as an Individual can have a GST number.

If you are buying from foreign companies: E.g Hostgator, Dynadot, Namecheap, Enom, Tucows, Realtimeregistrar, OVH, Hetzner, Envato etc which are not registered or charging you GST, You MUST register for GST yourself even if your turnover or receipts does not exceed Rs. 20 Lakh, and PAY GST on PURCHASE under RCM (Reverse Charge Mechanism) for import of services.

However, If you are buying from Godaddy India and put your GST no. while purchasing, Godaddy will not charge you GST directly, but it is YOUR (Buyer’s) responsibility to pay GST on your purchases from Godaddy to the GST department.

When you SELL to international clients, under GST, you need to make sure that you apply for LUT (Letter of UnderTaking) at the GST portal, only after that you can isse 0% rated invoices for export.

Additionally, You must get FIRC or Inward receipt for payments you receive from Foreign clients as proof of Export. Links for Paypal and Transferwise FIRC are given in references.

You can take a refund of your Input GST if your majority of business consists of exporting goods/services.

Company Formation:

Although my personal preference is to incorporate a Partnership Firm, you can incorporate an LLP, Pvt. Ltd, Partnership firm or Proprietorship firm depending upon the nature and requirements of your business. Though there are additional compliance exercises for LLP and Pvt. Ltd formation.

One of the drawbacks of proprietorship firms is: At all documents and references ( including GST and PAN ) your personal name appears instead of your firm’s name, which might look a tad unprofessional to some.

You must get a Tax Audit if your business turnover crosses 1 Crore.

TDS Liability:

If you are a Pvt. Ltd., LLP, or a Partnership Firm, then you are also required to comply with the TDS norms. For Proprietorship Firm, If your total receipts are more than 1 Crore in a financial year, then you need to register and obtain for TDS / TAN.

You also have to deduct TDS for payments you made to your providers if your annual payments to a particular vendor is more than 30000 Rs towards any purchase, including Domain/Hosting/ Other services Purchases.

Examples:

TDS for ads on Google and FB: 2% : Ask for PAN No. from Respective Companies

TDS on Godaddy: 10.4% ( Section 195 with cess ) : Ask for PAN no. from Godaddy

TDS on DynaDot, Namecheap: 20% ( As they are not liable for providing PAN no. due to them being non-indian entities )

TDS Claims:

TDS Claim process for Facebook: https://www.facebook.com/help/contact/816921465360613

TDS Claim process for Google: https://support.google.com/a/answer/7439579?hl=en

References:

Link for Paypal FIRC: https://www.paypal.com/in/webapps/mpp/firc-certificate

Link for TransferWise FIRC: https://transferwise.com/help/15/paying-for-your-transfer/2655509/whats-a-foreign-inward-remittance-certificate-firc-and-how-can-i-request-one

Accounting Software Recommendation: For fast and smooth online Transactions Zoho Books

Website for Tax Reference and Common Queries: TaxGuru.in

Disclaimer: Above mentioned pointers are just broad and common knowledge, covering the basic aspects of taxation. Please do not take it as a format professional advice, and always consult with your respective CA for all implementations.