Some Important Facts about Foreign Affiliate Marketing Income in Indiaby Praveen Singh Digital Marketing
Affiliate marketing is one of the best digital business models in India. India is a country where affiliate marketing is highly promising, where up to 80% of affiliate commission can be dugout. Affiliate marketing agencies in India or other individual affiliate marketers run a profitable business with affiliate income from foreign countries. However, every affiliate marketing professional must know about the taxation procedures on India's foreign affiliate marketing income.
At which place the foreign affiliate marketing income is taxable
First and foremost, marketers need to understand the basic rule of income tax. You are liable to pay income tax to the country if:
That country hosts the source of your income,
That country hosts your residence, or
That country hosts the source of your service.
The affiliate marketer from India must understand that the source of their income is in this country, and also, they are the residents of this country. Hence, any digital marketer in India earning through foreign affiliate marketing must be accountable to pay income tax to the Indian government and not to the foreign government. Any digital marketing company in Gurgaon or any freelancer from India follows the rules for such taxes stated by the Indian government.
To summarize, affiliate marketing income received by a resident of India from a foreign registered company is not taxable by that foreign country. Further, you are allowed to affirm tax deductions for the related digital business while computing annual taxable income.
The two ways of how affiliate marketing taxes are computed in India are:
1. Income Tax – Direct Tax:
Affiliate marketing agencies in India have an income source and are thus treated as a regular business. They are liable to receive tax deductions on all business expenditures while calculating your net taxable income. It applies to the freelancers and other forms of digital marketers from India, as well.
According to Section 14 of the Income-tax Act, 1961, five heads of income are considered –
Income from direct salaries.
Income from real estate properties.
Income from the profits and gains of business or professions (PGBP).
Income from capital gains, and
Income from other sources.
The foreign affiliate earnings of a digital marketing company in Gurgaon or any other place in India would fall under profits and gains of business or professions (PGBP). The income may also fall under 'other sources.'
Let's look unto on what might be the possible tax slab for a financial year of Affiliate marketing agencies in India –
Net total income = Gross Receipts – (Cash Business Expenses + Non-Cash Business Expenses + Section 80C (Investment to LIC, PPF, FD, etc.). This Net total income is the taxable basis slab rate for the concerned financial year of affiliate marketers.
2. Goods and Service Tax (GST) on Affiliate Income – Indirect Tax
Goods and service tax (GST) comes under the Indirect tax Laws in India and is also subjected to affiliate marketers besides direct taxes. IGST (Integrated Goods and Services Tax) Act, 2017 and the CGST (Central Goods and Services Tax) Act, 2017 are the two statutory acts forming the basis of GST. The business of affiliate marketing qualifies as the supply of services under the CGST Act, 2017. These services qualify as the Online Information and Database Access or Retrieval services (OIDAR services).
A digital marketing company in Gurgaon or any other place in India is the supplier of such services. The place where the recipient of such services is situated in the place of supply of OIDAR services. Therefore, while doing foreign affiliate marketing, the service is supplied out of India. Hence, such services are subjected to 0% GST taxes under the following condition –
The supplier of services must be located in India.
The recipient of services must be located outside India.
The place of supply of services must be outside India.
The payments for such services must be received through convertible foreign exchange.
Both the supplier of service and the recipient of service must not be a distinct person.
Under GST law, you may have any one of the two options as affiliate marketing qualifies as export of service:
Export of service without payment of any tax that is supposed to come under a Letter of Undertaking (LUT) / bond
Export of service along with tax payment and claim of the refund for later on.
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