We are thinking about the same thing that you are! After numerous ITR due date extensions for the FY 2019-20, can we expect another one now? Considering the roller-coaster 🎢 ride that the year 2020 has been, we don’t know what to expect anymore. 🤔
The initial date to file ITR (tax audit not applicable) was 31st July 2020 that was extended to 30th September 2020 which in turn was extended to 30th November 2020. Since the world was being controlled by aliens 👽(perhaps), obviously that was not enough. As a relief to the taxpayers, the due date was extended to 31st December 2020. Yet again, the thriller 😵 movie that we have been a part of was far from ending and the deadline had to be pushed to 10th January 2021. (if tax audit is not applicable)
Let’s look at the latest due date extensions that were announced on 30th December 2020, just a day before the former deadline. 😌(relief much?!)
With the ITD announcing due date extensions a day before the deadline, do you think it is bound to happen again? We are as clueless as you are! 😕
In retrospect, we almost had a year to ourselves just to file our ITR. With so many extensions it is normal for people to think another one might be on its way. But should we really be relying on what ifs?
As per the Income Tax Department statistics, a total of 6,21,680 ITRs have been filed on January 8, 2021, up to 4 PM. Further, around 1 Lakh ITRs were filed in just an hour’s time! Crazy, right?!
With only 2 days to go, it is time that we don’t hold our breath for ITR due date extension and act proactively. Do you think it is wise to wait till “tomorrow”? File your taxes in a jiffy and make the most out of your weekend!
Our weekend plans you ask? Depends on when you decide to file! 😛
In view of the COVID-19 pandemic, states had filed their petitions requesting the Income Tax Department to extended the Due Dates to file Income Tax Return for FY 2019-20 i.e. AY 2020-21.
Just a day before the ITR filing due date of 31st December 2020, the Finance Ministry extend the due dates for Income Tax Returns, Tax Audit Report, and GST Compliances.
Also, 16,66,548 ITRs were filed on 30th December up to 8pm. And 1,58,168 ITRs were filed between 7pm to 8pm i.e. after the extension announcement was made.
The revised due dates are as follows:
FY 2019-20 (AY 2020-21)
Extended From
Extended To
ITR Filing due date when Tax Audit is not Applicable
31st December 2020
10th January 2021
Submission of Tax Audit Report
31st December 2020
15th January 2021
ITR Filing due date when Tax Audit is Applicable
31st January 2021
15th February 2021
In view of the continued challenges faced by taxpayers in meeting statutory compliances due to outbreak of COVID-19, the Govt further extends the dates for various compliances. Press release on extension of time limits issued today: pic.twitter.com/lMew09HXMq
Today’s generation, also known as millennials, love working for themselves. They like being answerable to themselves, being accountable, and acting independently. For the same reason, blogging is widely gaining popularity among millennials.
In this digital age, this profession can be very lucrative, along with making you famous! Digital creators in India can earn lakhs every month. Yes, you read that, right! Lakhs! Blogging income is taxable under the Income-tax act and should be taken into account while deciding upon a career. To help make you an informed choice, we have covered all you need to know about taxes on the income received from blogging
What is Blogging?
The dictionary meaning of blogging is ‘a website containing the writer’s experiences, opinions or events in their life’. Recently, with the traction of YouTube in India, blogging has evolved to vlogging, which is nothing but a video format of a blog. So, the job of a blogger is to publish content regularly on their website to increase engagement and viewers.
Sources of Income from Blogging
You might be thinking that I have a website, but how does that make me money? How do I monetise my blog?
Your website is your primary business, and there are a couple of ways you can make money off of it. Listed below are a couple of sources that a blogger can make money from –
Sponsored Ads:
Once a blogger has created an identity and an audience for themselves, interested brands pay them for endorsement of products.
Affiliate Marketing:
Brands pay bloggers to promote their products. If a user buys the product through the blogger’s website, the blogger gets paid a certain mutually decided amount.
Advertising:
Bloggers can sell spaces on their websites to advertisers to run ads. The process can be automated, where the advertiser with the highest bid wins the space.
Freelancing:
Bloggers can also do various freelancing services in which they can collaborate with others and get paid for the project.
How to Calculate Taxes on the Income Received from Blogging
Since you need to file your taxes on the income from blogging, you need to know that this blogging income falls in the Income from Business/Profession section. According to the Income Tax Act, the taxpayers falling under this section must pay a tax on the income earned, excluding some allowable expenses.
Coming to allowable expenses, yes, there are a couple of costs under this section which can help bloggers save money and the revenue falling under allowable expenses will be non-taxable.
Allowable expenses while filing taxes on the income received from blogging-
Domain hosting expenses
Salaries of employees
Payments to freelance consultants
Convenience charges
Rent
Utility expenses such as electricity, phone bill, etc.
Depreciation *
* Distributing the cost of the assets (which directly contribute to revenue generation) over the life of the asset is called Depreciation.
As a blogger, you must save the receipts and bills of payments that fall under allowable expenses. These payments must be such that they directly contribute to business and revenue.
Let’s take an example of a blogger who goes by the name of Pearl. Pearl is a travel blogger whose gross annual income along with expenses is tabulated below.
Source of Income
Annual Income
Travel Blogging
9,00,000 INR
Now let us look at Pearl’s annual expenses –
Particulars
Money Spent (Annually)
Rent
1,00,000 INR
Utility Expenses
1,50,000 INR
Domain Hosting Charges
25,000 INR
Payment to Freelance Consultants
40,000 INR
Depreciation (40% on 2 Lakhs)
80,000 INR
Net Taxable Income
3,95,000 INR
The net taxable income for Pearl is Rs. 3,95,000. The taxes need to be paid according to the tax slab Pearl falls in. On top of this, Pearl can also make other investments in mutual funds, PPF, etc. which are deductible under section 80C of the Income Tax Act.
As a blogger, you need to file Advance Tax which means paying the income tax the same year in which income is earned. Apart from this, a blogger will be subject to taxes such as Goods and Services Tax (GST) and Tax Deduction at Source (TDS).
FAQs
Q1. Is it mandatory for a blogger to register under GST?
A1. If a blogger has an aggregate turnover of 20 Lakhs or more, they need to get themselves GST registered. The aggregate turnover for North East and Hilly states is 10 Lakhs.
Q2. I have two separate websites. Do I need individual GST registrations for both?
A2. If both websites are under the same name, you need not have separate GST registrations. Both websites can be listed under the same name while registering for GST.
Q3. Is it okay to transfer all my Google AdSense money to my savings account?
A3. Yes, there is no limit to the amount that you can transfer to your bank account from Google AdSense. However, keep in mind that all these transactions should be mentioned while submitting your ITR.
Q4. I do blogging part-time. Do I need to share my secondary income while filing my ITR?
A4. You must show all your incomes while filing your income tax return. The primary source of income, i.e. your salary will come under the head ‘Salary from Income’ and the freelancing blogging money will fall under the head ‘Income from Business/Profession.’
Q5. What happens if I do not show my blogging income while filing my taxes?
A5. The blogging income is taxable by law, soo it is imperative that one should file their taxes for the income received from blogging. Income from blogging falls under the head ‘Income from Business/Profession’. If you fail to pay your Income Tax on time, you will be charged with a penalty as per Section 234F.
For FY 2019-20, a penalty of –
-> Rs 5,000 is applicable if the return is filed after the due date but by 31st December 2020. -> Rs 10,000 is applicable if the return is filed after 31st December 2020 but by 31st March 2021.
We hate spoilers, but we’d love to find out how 2020 ends.
Ah, did you know 31st December is the last day to file your taxes for F.Y. 2019-20? And you don’t want to end the year worrying about filing your ITR and possibly tax penalties and scrutiny that comes with it. That’s exactly where we save the day. 🦸
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What are Bonus Shares: They are new shares issued to existing shareholders without any additional cost. It is usually distributed based on the proportion of the current holdings of an investor. Bonus shares are the accumulated earnings of a company which is not given out as dividends but converted into shares. This practice is also called a Bonus Issue of shares.
Example: A company might announce bonus shares in the proportion of 1:1. This means that for every 1 share held by an investor, the company issued another 1 bonus share. Since the investor now holds two shares, EPS gets halved. Hence the bonus shares do not affect the EPS of the investor.
Note: Bonus shares are considered free shares as their cost of acquisition is taken as zero, although they are not free in the true sense.
Advantages of Bonus Shares
As mentioned above, bonus shares do not have any impact on total EPS. If total EPS doesn’t change, then the question arises – what’s the need for bonus shares? Bonus shares help in solving two purposes:
Increase the Liquidity Base: When the price per share of a company is relatively high, it becomes difficult for the investors to buy new shares. Hence, bonus shares are issued to investors. An increase in the number of shares results in downward pressure on the stock price and reduces the price per share. This increases the marketability and liquidity of the shares and in turn, the retail participation.
Tax Saving through Bonus Shares: In the case of cash dividends, companies have to pay dividend distribution tax resulting in diminished returns for investors. In the case of bonus shares, no dividend distribution tax is levied.
Any profit or loss arising on the sale and purchase of shares/securities falls under the head “Capital Gain” (Except Business Income for those who are involved in the business of sale and purchase of shares). Before we talk about Bonus Shares, let’s take a look at Tax Implications on LTCG (Long Term Capital Gains) and STCG (Short Term Capital Gains).
Type of Capital Gain
Tax Rate
Long Term Capital Gain (when Securities Transaction Tax is not applicable)
20% + Surcharge and Education Cess
Long Term Capital Gain (when Securities Transaction Tax is applicable)
Exempt
Short Term Capital Gain (when Securities Transaction Tax is not applicable)
Normal slab rate applicable to Individuals
Short Term Capital Gain (when Securities Transaction Tax is applicable)
15% + Surcharge and Education Cess
The taxability of gains from the sale of Equity and Debt mutual funds are different. Funds with more than 65% of the portfolio consisting of equities are called Equity Funds.
The cost of acquisition of bonus shares is taken as zero hence the capital gain on selling a bonus share issue is equal to its selling price.
Let us take an example to understand the calculation of capital gain tax in case of transfer of bonus shares.
No. of Shares held originally
100
Bonus Announcement
1:1
Total Number of Shares post bonus
200
Purchase Price
50
The total number of shares held after the bonus issue will be 200. Now, the investor sells 100 shares @INR 50 before 1 year. Taxable Short Term Capital Gain would be as under-
Selling price (100*60)
5000
Cost of acquisition (100*40)
(4000)
Capital gain on sale of original shares
1000
Short Term Capital Gain tax of INR 150 (i.e. 15% of INR 1000) is payable.
Now, the investor sells the remaining 100 shares after some time (in the same year) @INR 50. Taxable short term capital gain on transfer of bonus share would be as under-
Selling price (100*50)
5000
Cost of acquisition (100*0)
0
Capital gain on sale of bonus shares
5000
Short term capital gain tax of INR 750 (i.e. 15% of INR 5000) is payable.
Note: Long term capital gain tax on the transfer of shares is payable @10% from F.Y. 2018-2019.
Now investors mainly indulge in Bonus Stripping to evade income taxes. The transaction related to the buy/purchase of Bonus Shares is done in a manner where the net result would be a Short Term Capital Loss. This loss can later be adjusted against any Capital Gains.
Example
Investors buy units three months before the record date of the new bonus shares
Once the company issues the bonus shares, the investors sell the original shares they bought above
This leads to Short Term Capital Loss
After 1 year, the investor sells the bonus shares
Yash identified that Parle is going to issue bonus units in the ratio of 1:1. Before the record date, he acquires 400 units of Parle. The price of the units on the said date was INR 500. Total purchase price= INR 2,00,000.
On the day of the bonus issue, he receives 1 bonus unit for every unit held i.e. 400 bonus units.
Now, post the bonus issue, the market value of the units will decline. Each share is now worth INR 200. Yash sells the 400 units he purchased for INR 200. He makes a loss of INR 1,20,000.
Later, after a year, he sells the bonus units. Since the cost of acquisition of bonus units is Nil, the entire proceeds received from the sale of bonus units would be his long term capital gains.
In this case, Yash can first set off the short term losses made from original units held, against the long term capital gains made from the sale of bonus units. Subsequently, if the capital gains remaining after set-off is greater than Rs 1 lakh, he would be taxed on it at the rate of 10% only.
Income tax implications on Bonus Stripping
Section 94(8) of the Income Tax Act, 1961 keeps a check on the Bonus Stripping. It stated 3 conditions when a shareholder cannot carry forward or book loss on sale transactions. Also, These losses would be considered as the Purchase Price of the bonus units acquired if a person:
acquires units within 3 months before the record date
on which bonus units are subsequently announced,
and the original units are sold within 9 months from the record date
Keep in mind, the practice of bonus stripping is considered narrow-minded and anyone can get caught u/s 94(8) of the Income Tax Act, 1961
To conclude, bonus shares have a lot of advantages. It is a great way for companies to increase their liquidity base and enhance the faith of investors. It also yields a higher dividend to investors as he holds a larger number of shares in the company due to bonus shares.
