How is the income of child YouTube users taxed and who pays their taxes?

Earning from social media platforms like YouTube and Instagram largely depends on factors like number of views as well as number of subscribers, engagement of the video, niche of the channel and traffic source etc. Apart from earning by making videos, many other sources add to the revenue of YouTubers such as Google AdSense, Affiliate Marketing and Sponsored Posts, etc. Income earned through any of the above is taxable.

In the case of minor YouTubers, the tax liability of such income becomes complicated as the income of minors is usually clubbed with that of the parents, except where it is earned from their skills. The applicability of the tax provisions depends on the source and nature of the income.

The income earned from making these videos will be considered as business income and is taxable under the head “Profits or gains of business or profession” (PGBP). Further, the expenses incurred for material manufacture shall be allowed as deduction from such income. On the other hand, the income earned by the YouTuber from affiliate marketing and sponsored posts will be taxed under the head “Income from Other Sources (IOS)”.

Normally, as mentioned above, the income of the minor is clubbed with the income of the parent of the minor, and accordingly, the parent will be liable to pay tax on the income of such minor. However, there is a clear exclusion wherein income earned by such a minor is taxed by the minor himself. Such provision would be triggered in specified circumstances, wherein either the minor is suffering from any disability specified under section 80U of the Income-tax Act, 1961 or the income is due to any manual work performed by him or the income is earned . Due to any activity which involves the use of the skill, talent or special knowledge and experience of the minor.

Income earned from making videos will be considered as application of some skill and talent. Therefore, such income earned by the minor YouTuber would be taxed under PGBP in the hands of the minor YouTuber and would not attract clubbing provisions.

Another way for YouTubers to earn is by applying for a Google AdSense account to monetize their videos. It works as an intermediary and serves ads from advertisers to users of YouTube through such accounts. Google policies specifically stipulate the minimum age to participate in AdSense, i.e. above 18 years. In such a scenario, a minor seeking to earn through AdSense needs to link his or her Google Account with a parent or guardian’s approved AdSense account. In particular, such income is not earned through application of the skill, talent or special knowledge and experience of a minor. Thus, such income will be clubbed in the hands of the higher earning parent and taxed exactly as if it was their own income under the above mentioned head iOS. It should be noted that a special deduction of 1,500 per child per annum is available to the parent, against whose income the minor’s income is being clubbed.

The same tax treatment will be followed for income earned from affiliate marketing. In general, affiliate marketing is a way where a person can mention any company’s products or services by inserting a unique link in the description of the video.

YouTubers get commission based on the sale of sponsored products or signing up to the advertised app/website. It is a form of performance-based marketing where commission acts as an incentive. The nature of such commission/referral income clearly states that it is not attributable to any manual labor or any activity involving the use of skill, talent or special knowledge and experience. Hence, it will be clubbed in the hands of the parent and charged to tax under IOS.

Additionally, certain compliances are required to be complied with by the minor YouTuber, including filing of Income Tax Return (ITR) if the income of such minor exceeds the ceiling limit 2,50,000. It is to be noted that obtaining a Permanent Account Number (PAN) is a prerequisite for filing ITR. Further, advance tax compliance will arise if his total estimated tax liability exceeds 10,000. Minor YouTubers and their guardians need to duly take care of the tax liability and reporting of income under the relevant Income Tax provisions.

Sandeep Sehgal is Tax Partner at AKM Global, a tax and consulting firm. Chetna Chowdhary, Manager-Tax, AKM Global, contributed to this article.