The taxation of income from Twitter will not be the same for all users. According to tax experts, how you engage on the platform will determine how your income will be taxed.
For instance, if your primary source of income is content creation on Twitter then it would be subjected to tax as ‘Profit and Gains from Business and Profession’
The income received from Twitter can be taxed either under the head of Profits and gains from business or profession (PGBP) or Income from other sources. The determination of whether this income is liable for taxation as business or professional income hinges upon the consistent and systematic nature with which the recipient engages in activities involving the creation and sharing of content on the Twitter platform.”
“In the event that these activities demand a substantial portion of the recipient’s reasonable time, attention, and labour, it would be appropriate to classify the income under the PGBP category,” Wadhwa adds.
For individuals casually tweeting and also receiving money on the platform, such income would be taxed as ‘Income from Other Sources”
“In case a person is casually earning income from Twitter, the same would be subjected to tax as ‘Income from Other Sources.
that any income shall be chargeable to tax under the head “Income from other sources” if it is not chargeable under any other head.
“The initial assessment should involve considering the classification of this income as business-related. Only if this classification is deemed unsuccessful would it then be appropriate to subject the income to taxation under the ‘Income from Other Sources’ category.
In any of the above cases, individuals earning money from X will have to file an ITR.
“Social media influencers are considered self-employed individuals, and their taxation follows a similar framework as other self-employed professionals. Hence, the income received by Indians from Twitter ad revenue will be taxed, and it will be mandatory to file an income tax return (ITR).
Will GST apply to Twitter income?
Twitter users have to set up Stripe account to receive money from the platform in their bank accounts. However, if they earn over Rs 20 lakh in a financial year from the platform, they will need to register themselves under the GST law.
“Social media influencers who earn over Rs 20 lakh in a fiscal year need to register their services under the GST law. Services provided by influencers are classified as Online Information and Database Access or Retrieval Services (OIDAR), which are subject to an 18% GST rate.
From a GST standpoint, experts also say that the taxability would depend on whether the Indians receive their share of the revenue from Twitter India or Twitter from abroad.
“The location where the advertisement revenue is accruing and the location of Twitter would govern the taxability of the income received. If the Twitter entity is situated abroad, then the income received would be treated as an export of services. However, for the same, the person must be GST registered and must also possess a valid Letter of Undertaking.
“If Letter of Undertaking does not exist, then the export of service may be undertaken with payment of Integrated Tax and refund of said taxes can be taken,” he adds.
You must ensure compliance with conditions of export of service such as receiving the money in foreign exchange. If the Twitter entity is situated in India, then GST would need to be paid on the said transaction.
“We understand many persons are receiving notices for such transactions and it is imperative that they assess the GST incidence carefully. For this purpose, the contract terms should be carefully reviewed and understood. Even the bank receipts should be carefully traced and documentation in the form of Bank Remittance Certificates confirming the receipt is in foreign exchange may need to be obtained.
Calculation of Tax on Income from X (Twitter)
Tax on X income would be computed as per the marginal slabs applicable to the taxpayer receiving such income from Twitter. In case the same is considered as ‘Profits and Gains from Business and Profession’, the taxpayer may be eligible to deduct certain expenditures incurred for activities on Twitter from which such revenue is generated.
According to Soni, the tax on income from Twitter can be calculated by following a process that considers your total income, deductions, and applicable tax rates. These include:
- Total Income: Add up all your earnings from Twitter and other sources.
- Deductible Expenses: Identify valid expenses related to your social media work and subtract them from your total income.
- Gross Total Income: Calculate the remaining amount after deducting expenses.
- Apply Deductions: Subtract applicable deductions like those under Section 80C or 80D.
- Taxable Income: The resulting figure is your taxable income.
- Tax Slabs: Check the tax rates based on your income bracket.
- Tax Calculation: Multiply your taxable income by the relevant tax rate.
- Rebates/Credits: Apply any available rebates or credits to reduce tax liability.
- Health and Education Cess: Add 4% cess to the tax after rebates.
- Final Tax Payable: Sum up the calculated tax with cess.
- Consider TDS: Account for any tax deducted at source (TDS).
Additionally, freelancers can file taxes under the Presumptive Taxation Scheme under Section 44ADA of the Income Tax Act, 1961. This means they can pay tax on freelance income on only half of their gross annual income, provided the total income for the year is less than Rs 50 lakh.
Can you claim deductions?
Recipients may claim a deduction of a certain amount, which he has incurred wholly and exclusively for the content generated for Twitter.
“An illustrative list of the expenditure that can be claimed as expenditure are internet charges, depreciation of computers, cameras, mic and other equipment, interest on borrowings used to buy computers or other equipment(s), salary of the team, and other related/incidental administrative expenses.
Income to be reported under which Head in ITR
In ITR, income from Twitter may fall under the head ‘Profits and Gains from Business and Profession’ or ‘Income from Other Sources’, depending on the cases mentioned above.
“Depending on the classification, such income shall be offered to tax in Schedule BP (Income from Business or Profession) or Schedule OS (Income from Other Sources). A salaried employee shall report such income in Schedule OS.
that if you have a regular job but also earn income from your social media activities on the side, the income from social media would generally be considered “income from other sources.”
If you are a self-employed individual, a freelancer, or a professional (e.g., a consultant, artist, or writer) and you generate income through your social media activities, this income would likely be treated as part of your business income.
How salaried employees receiving money from Twitter can report it in ITR?
“Salaried employees receiving money from Twitter may generally treat such income as ‘Income from Other Sources’ and report the same in Schedule OS under ‘Any other income’ specifying the nature of such income. Such taxpayers may report the said details in either Form ITR 1 or Form ITR 2.
Further, in the case of non-salaried taxpayers, such Twitter income may constitute a primary source and subject to tax under the head ‘Profits and Gains from Business and Profession’. The taxpayers should report the details of such Twitter income as well as any relevant expenditure incurred in Form ITR 3.
f you are a salaried person, then show the social media earnings as income from other sources. On the other hand, Social media influencers, being self-employed individuals, must adhere to tax regulations similar to other self-employed professionals. They must file an annual Income Tax Return (ITR) and disclose their complete income, including earnings from sponsored posts, brand endorsements, and product placements