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Google ad revenue other income, or business income?

Keshavaprasad B S (Engineer) (22 Points)

31 March 2017

I am a salaried employee, do some speculative stock trading, for which I am filing ITR 4, and also earn some google ad revenue from some of my android apps. I also earn some income by selling features on my android apps. Should I show the google ad revenue and the income I get by selling features on my android apps under business income, or as part of other income? I am building these android apps only in my free time, and am not involved in it regularly. If I show it under other income, can I claim depreciation for the mobile phone I bought in other to build the android apps, under section 57?

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5 Replies

Peter (Article Assistant) (118 Points)
Replied 01 April 2017

1. There is nothing preventing a salaried emplyoee in entering into business.
2. Hence Income from building android apps can be considered as business income provided if you can prove it.
3. If the above is considered then show the Income under Business. Expenses can also be claimed.
4. Depreciation on mobile can be claimed under either under income from Business or under Speculation Business. There is nothing preventing claiming depreciation under Speculation Business since mobile can be said as an asset used for conducting Speculation business.
5. If you are not considering point 2 but considering income under other sources then you cannot claim any expense with regard to this income.
Moreover depreciation on mobile can be claimed only under Business Income - can claim under Speculation Business.

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Keshavaprasad B S (Engineer) (22 Points)
Replied 02 April 2017

Thanks for the reply. Say I go with the option of claiming the income under other income. Say, my wife is also a software engineer and assists me in my android development. In that case, can I claim that I have let out the mobile phone I bought to my wife and the income I have earned as that gained due to letting out of the phone, and hence be eligible to claim depreciation on the phone, as per section 57 5.2.2 here?

Peter (Article Assistant) (118 Points)
Replied 02 April 2017

1. Theoretically what you said can be done. You will have to enter into a rent agreement for use of mobile with your wife. just to prove it.
2. Practically it will not hold good. besides the rent you give her will be taxable in her hands as income from other sources.
3. Y not claim depreciation under Speculation Business Income

Keshavaprasad B S (Engineer) (22 Points)
Replied 02 April 2017

Reason I don`t want to claim under speculation business income is that I have bought multiple phones for android development and testing. For a trading business done my me individually, it does not make sense to use multiple phones.

Now, problem with showing the android apps income as business income is that I get very little income from that source, and if I have to include that income and the depreciation of assets of that income under business income and expenses, I would have to get my accounts audited, since the profits would be less than 8% of income (in fact, it would be in loss). So, was seeing if there is a way to avoid all these complications, and still be tax compliant.

Peter (Article Assistant) (118 Points)
Replied 05 April 2017

Deduction under income from Other Sources.
Any other expenses from earning income [ Sec. 57(iii)] : if the following 4 basic conditions are satisfied :
The expenditure should be incurred solely for earning such income
ii. it should not be in the nature of capital expenditure
iii. is should not be in the nature of personal expense.
iv. is should be incurred in the relevant accounting year.