How are child YouTubers taxed on their income and who pays their taxes?

Earnings from social media platforms such as YouTube and Instagram largely depend on the number of views along with factors such as the number of subscribers, engagement of the video, niche of the channel, and traffic source, etc. Apart from earning by creating videos, several other sources add to the revenue of YouTubers such as Google AdSense, Affiliate Marketing and Sponsored Posts, etc. Income earned from any of the above means is taxable.

In case of minor YouTubers, taxability of such income gets complex as the income of minors is ordinarily clubbed with parents except where it is earned from their skills. The applicability of tax provisions depends upon the source and nature of income.

The income earned from creating these videos shall be considered business income and are taxable under the head “Profits or Gains from Business or Profession” (PGBP). Further, expenses incurred for content creation shall be allowed to be deducted from such income. On the other hand, the income derived by the YouTuber from affiliate marketing and sponsored posts would be taxed under the head “Income from Other sources (IOS).”

Generally, as mentioned above, the minor’s income is clubbed with the income of the minor’s parents, and accordingly, the parents shall be liable to pay tax on such a minor’s income. However, there is an explicit exclusion wherein income earned by such a minor is taxed in the hands of the minor itself. Such provision shall get triggered under specific circumstances wherein either the minor is suffering from any disability as specified under section 80U of the Income-tax Act, 1961 or the income is on account of any manual work done by him/her or the income is earned on account of any activity which involves the application of skill, talent or specialised knowledge and experience of the minor.

The income earned from creating videos would be considered an application of certain skills and talent. Therefore, such income earned by a minor YouTuber shall be taxed in the hands of the minor YouTuber under the head PGBP and clubbing provisions shall not get attracted.

Another way to earn for YouTubers is to apply for a Google AdSense account to monetize their videos. It works as a mediator and supplies ads from the advertisers to YouTube’s users via such an account. Google policies specifically pose conditions with respect to the minimum age for participation in AdSense, i.e., above 18 years. In such a scenario, a minor willing to earn through AdSense must link his/her google account with the approved AdSense account of a parent or guardian. Notably, such income is not earned through applying the skill, talent or specialized knowledge and experience of a minor. Thus, such income would be clubbed in the hands of the parent having higher income and taxed just like if it were their own income under the head IOS as explained above. It is to be noted that an exclusive deduction of ₹1,500 per child per annum is available to the parent under whose income the income of the minor is being clubbed.

Similar tax treatment shall be followed for the income earned from affiliated marketing. In general, affiliate marketing is a way where one can refer to any company’s products or services by putting a unique link in the video’s description.

YouTubers get a commission based on either sale of the 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 evidently explicate that it is not on account of any manual labour or any activity involving application of skill, talent or specialized knowledge and experience. Therefore, it shall be clubbed in the hands of the parent and taxed under the head IOS.

Additionally, certain compliances need to be complied by the minor YouTuber which include filing of income tax return (ITR), if the income of such a minor exceeds the threshold limit of ₹2,50,000. It is to be noted that obtaining a permanent account number (PAN) is a prerequisite to filing ITR. Furthermore, advance tax compliance shall arise if his/her total estimated tax liability exceeds ₹10,000. Minor YouTubers and their guardians need to duly take care of the tax liability and the reporting of income under the relevant income tax provisions.

Sandeep Sehgal is tax partner, AKM Global, a tax and consulting firm. Chetna Chaudhary, manager – tax, AKM Global, contributed to this article.