The rise of social media has provided people with the opportunity to earn money from the comfort of their homes.
Many individuals are making substantial incomes through platforms like YouTube and Twitter (now X).
Since most of these social media companies are based abroad, some people mistakenly believe they don’t need to pay taxes on their earnings.
However, this assumption is incorrect. If you have a YouTube channel or generate income from any other social media platform, you are liable to pay taxes.
The Income Tax Department has recently issued notices to individuals earning through these mediums.
Two Types of Earnings from Social Media:
- Income from Business and Profession: Social media income can be categorized into two main types.
If an individual creates content for social media as their primary source of income, it falls under the category of income from business or profession.
- Income from Other Sources: On the other hand, income from social media generated in one’s spare time, not as their primary source of income, is considered income from other sources.
It’s crucial to note that this secondary income should be a smaller portion of their total earnings and significantly less than their primary income.
Many people fall into this category, often creating channels for their hobbies, which generate some income.
Tax Rates on Social Media Income:
The next important question is about the tax rates applicable to income from social media.
In this regard, experts clarify that whether the income from social media platforms falls under the category of income from business or income from other sources, the tax rate is determined based on the taxpayer’s applicable tax slab.
For example, if a taxpayer follows the old income tax regime, is below 60 years of age, and their income falls between Rs 2.5 to 5 lakhs, they are in the 5 percent tax slab.
Incomes between 5 to 10 lakhs are taxed at a rate of 20 percent, and income above Rs 10 lakhs is taxed at 30 percent.
These tax rates are applicable regardless of whether the income is generated from social media platforms or other sources.
