Do you have to file income tax return if you are earning income through affiliate marketing or referral business
As we know, now ITR 1 to 4 are available on e-filing portal for filing Income tax return of FY 2023-24 and accordingly one should be aware that whether they are required to file Income tax return or not.
In the current scenario each and every person is becoming an influencer or entrepreneur and accordingly they have started influencing people to purchase any goods or services and against such influence, the companies provide them some commission or referral bonus to get new clients.
With the new age start-ups like Flipkart, Amazon or Meesho, Glowroad or even Upstox, zerodha etc. where Flipkart, Amazon allows a person to create an affiliate link and pays affiliate commission if people purchases using his link, meesho and glowroad provide commission to individuals for becoming sub-seller and such person get’s commission on each sale made by them whereas Upstox and zerodha provides referral bonus for bringing new clients to their platform.
Such affiliate commission, commission or referral bonus is nothing but a form of commission which these companies are paying for attracting new customers or getting new sales and they claim expense of such commission paid and also deduct TDS on such commission or referral bonus if the amount paid to a person in a year exceeds Rs.15000. Such TDS is deducted at the rate of 5% u/s 194H of the Income tax act.
Irrespective of whether TDS is getting deducted or not, this is a taxable income and accordingly it needs to be disclosed in Income tax return. Now, when one is earning referral bonus, affiliate commission etc., all such are nothing but commission and this could be either shown under Income from other sources in Income tax return if this is not the business activity of assessee. However, if this is a part of business activity for an individual like for many influencer, housewives etc. who have such income as main source of income, then such people have to show it as business income in Income tax return.
When one shows this income as business income they cannot offer this income under 44AD, as 44AD does not allow commission income to be shown under presumptive taxation. Hence, any person who is earning such commission income has to prepare full P&L and balance sheet and file ITR 3 and cannot file return under ITR 4. Further, if such person is earning such commission then they can claim any expenses incurred for earning such income as expense against such income and offer the profit to tax. Expense could be any further commission paid or depreciation of any machine used etc.
Hence, it is advisable to carefully consider if you have earned any such affiliate commission or referral bonus and offer the same to tax.
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