Now Youtubers in India will get even less amount from Youtube | 24% Tax withholding by Youtube in USA

written by Income tax Expert | March 11, 2021

Youtube is growing in India as a platform to share videos and simultaneously people investing in Digital marketing is also increasing because of which people who are creating videos on Youtube are earning handsome amount.

Youtube which was considered as a part time passion before is now a full time career for many people. Many of them are even earning crores from Youtube Ads itself.

However now Youtube has introduced a new tax requirement whereby they’ll withhold tax on non-US creators in USA. Let’s understand the new conditions for withholding of such tax and how it will affect Indian creators.

Withholding of tax in Indian tax can be considered as TDS i.e. Tax deducted at source by youtube.

The below e-mail has been received by creators who are earning income from Youtube:

“Hi there,

We’re reaching out because Google will be required to deduct U.S. taxes from payments to creators outside of the U.S. later this year (as early as June 2021). Over the next few weeks, we’ll be asking you to submit your tax info in AdSense to determine the correct amount of taxes to deduct, if any apply. If your tax info isn’t provided by May 31, 2021, Google may be required to deduct up to 24% of your total earnings worldwide.

What do I need to do?
In the next few weeks you will receive an email to submit your tax information in AdSense. The online tax tool in AdSense is six steps and will ask you a series of questions to guide you through the process to determine if any U.S. taxes apply. For more information on these changes and a list of tax info to prepare, visit our Help Center.

Why is this happening?
Google has a responsibility under Chapter 3 of the U.S. Internal Revenue Code to collect tax info from all monetizing creators outside of the U.S. and deduct taxes in certain instances when they earn income from viewers in the U.S.

For creators outside of the U.S., we will soon be updating our Terms of Service where your earnings from YouTube will be considered royalties from a U.S. tax perspective. This may impact the way your earnings are taxed, and as required by U.S. law, Google will deduct taxes.

How will my earnings be impacted?
If you provide your tax info, U.S. taxes may only be applied to your monthly U.S. earnings from AdSense (revenue earned from viewers in the U.S. through ad views, YouTube Premium, Super Chat, Super Stickers, and Channel Memberships). If no tax info is provided, your tax rate may default to the higher individual backup withholding rate (24% of total earnings worldwide). To estimate the potential impact on your earnings follow these instructions.

Thanks,
The YouTube Team”

 

Let’s see what we understand from the above e-mail:

1. The above thing is only applicable to people earning through Adsense from Youtube and hence if you are using Adsense for your Website this is not applicable as of now.

2. This is applicable for Youtube creators outside India and hence it will cover Indian creators.

3. According to above e-mail and videos published by Youtube, people earning income through Google Adsesne will have to submit their tax details and if the same is not declared tax will be withheld or TDS will be deducted at 24% for individual creators and 30% for other creators.

4. According to above e-mail and details provided by Google if the creators provide tax details then in that case they can claim benefit of Double tax avoidance agreements and in that case tax will be withheld based on the rate mentioned in DTAA between that country and USA, if any.

5. According to videos published by Youtube they are treating such income from Google Adsense to creators as royalty and hence TDS on such royalty as per India USA DTAA will be 15%.

6. If one fill’s the tax information Form then in that case person can claim benefit of DTAA and later on while filing Income tax return in India can claim credit of tax withheld in India. Also, tax will be withheld only on Adsense income earned from USA viewers.

7. However if one does not fill the form till 31st May 2021, then tax will be withheld at 24% on total earning.

Tax information above would include your country of residence, PAN number, DTAA applicable and other details as required by Youtube.

Thus, from the above it’s clear that whether you provide tax information or not there will be a reduction in amount/ income that one receives in his/ her bank account.

Although one would be able to take credit of tax withheld in USA but it will be not an easy task to take tax credit as the same won’t be available in Form 26AS and one will have to make extra effort to claim such credit.

To read the full details of above tax withholding from Google CLICK HERE: https://support.google.com/youtube/answer/10391362?hl=en

To see videos on this topic visit our Youtube channel: https://youtu.be/4YBFz912qc8

You can also watch vide on how to pay tax on youtube income: https://www.youtube.com/watch?v=5JMbAZPE5wo