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Is it necessary to report the income you earn from a tutor job?

By Anurag, published on 04/10/2019 We Love Prof - IN > Tutoring > Advice for Tutors > Reporting The Income Earned From a Tutor Job

India has a jaw-dropping student population of 315 million, according to the statistics of a 2011 Census, which is the largest in the world. Hence it is not that hard to realise that there must be an equally large teaching force supporting this ever-growing number of scholars.

Even though India has over 7 million elementary and secondary school teachers, a large fraction of Indian students depend solely on private tutors for academic progress, academic advising or mere completion of syllabi. A National Sample Survey Office (NSSO) report says that one out of every four students take private tuition classes in India, which is an indirect indicator to the fact that a big portion of India’s working population uses a tutor job as one of their several ways to make money. Most of these tutors are undergraduates or graduates with a minimum bachelor or college degree looking for work or school teachers in need of extra income.

Now in a time where the number of private tutors seems to be increasing almost every six months, online platforms like Superprof come to the rescue by providing a medium for students to select their tutors from a pool of individuals willing to offer academic assistance. Tutors create a profile on Superprof describing their qualifications, teaching style, pay rates and other details. All a student has to do is choose the most suitable teacher for himself.

In India, a tutoring job can provide satisfactory financial assistance to a college student who can charge a desired hourly rate for his or her service while enjoying a flexible schedule of work. But the question is do you have to pay taxes on the money earned from doing private tuitions. What if you are already paying taxes on another salaried job? What if your income from tutoring is not a significant amount? Are tax regulations on freelancing jobs or any online job that strict in our country?

In this article, we will talk about when and how to record your earnings, how to report your accounts and what kind of tax you have to pay as a private tutor. Also, if you wish to become a tutor, having some knowledge of bookkeeping is extremely important.

When should you record your income?

There are millions of people providing tutoring services all over the country ranging from ages of around 18 to even late 60s. In India, tuition teaching jobs are one of the most common income sources apart from other online jobs for student individuals. The education sector thus has become a trendy and easy platform for making extra money, especially in states like West Bengal and Tripura.

Running a tutoring business can be simple as long as you follow the standards and procedures Reporting your income is extremely important.Source: Upsplash

Each tutor has a pay rate that is variable to several factors like the number of academic subjects, the grade of the student, the number of hours a week e.t.c. But not every dime earned through home tutoring needs to be recorded as per Indian taxation guidelines.

If your income from tutoring students is more than INR 1,20,000 or your total earning for the past three years sums up to be more than INR 10,00,000, you will need to maintain books of records for your job. Only if the amount of money generated from tutoring incomes is less than INR 1,20,000 you will not have to worry about keeping financial records.

But otherwise, you will have to produce documents validating dates and amounts of money receipts which will allow the assigned Officer to compute the taxable share of your income under the Income Tax Act. Moreover, if you are generous to provide free tutoring services to some of your tutees, then also you should maintain a record of the same for self-reference.

That being said, it is still advised to keep a minimum listing of your earnings as a freelancer irrespective of the amount earned, even if you are teaching online, for it may be helpful during future tax filings. Just because you are your own boss with your own schedule that doesn’t mean you should not keep track of your activities.

How to keep a record of your tuition earnings?

While the private tuition market consisting of popular tutoring companies and online tutoring services in the country, has a multi-billion dollar valuation which seems to be growing in number every year, the world of individual home tutoring and other online jobs from home has a more hazy statistic.

Even though almost every class 11 or 12 students from CBSE or ICSE boards is taking personal home tuitions, no one is sure of the exact total number. The main reason behind this is the lack of record keeping.

Written logs are acceptable but need to be given added care as they are more vulnerable to damages. An online spreadsheet is the most recommended option though excel files work fine too. Online documents are easy to share and least prone to deletion or other kinds of loss.

The logs should carry information regarding fees collected from students and the date of receipt. You should also include the side expenses in a similar format with adequate proof of transaction. This will help in the reduction of the amount of money to be paid as taxes.

Also, don’t forget to make sure that every record is genuine and honest. Trying to trick the system with manipulated information and false claims can lead to serious penalties. For example, not including complete records of all money receipts to prove a lower net income or adding false expenditure costs will be considered as unfair practices.

If you are a tutor, you can check for online tutoring jobs here.

Factor expenses as a home tutor to reduce net income value in your record

How should a home tutor record their earnings? Keep a record of every transaction to factor expenses. Source: Visualhunt

Unlike online jobs from home without investment, tutor jobs require a minimum level of investment to get themselves started and running. Just because you make a total of INR 1,20,000 or more by providing private lessons does not mean you have complete ownership of that very amount. In fact, there are numerous expenses that you might have to deal with to conduct your tuition sessions which you can henceforth subtract from the net amount earned.

These include cost of promotion and advertising, investment on furniture and other assets like chairs, insurance cost ,tables, whiteboard, projectors, computers e.t.c, cost of stationery items, printing and photocopying of notes or course materials, purchase of books, guides, journals and other scholastic study materials and any other expenses directly connected to private tutoring like electricity, room renting, high speed internet facility e.t.c. Online teaching, Virtual learning or Online tutoring services like Udemy, tutorvista, Boxfish, Rosetta Stone e.t.c have to pay an added cost of owning web resources like hosting and data storage.

But these expenses will be held accountable only if you can produce necessary proofs supporting your claims like invoices, bills, financial documents e.t.c.

What kind of tax do you need to pay as a tutor?

In India, the taxes imposed on net income can be categorised into the following heads: Income from salary, Income from house property, Income from profession and business, Income from capital gains and lastly Income from other sources.

What taxes do private tutors pay? You should have comprehensive knowledge about the nature of taxes. Source: Visualhunt

Types of tax heads
In India, the taxes imposed on net income can be categorised into the following heads: Income from salary, Income from house property, Income from profession and business, Income from capital gains and lastly Income from other sources.

The first four are the main heads under which people generally state their earnings. But there are still some fields that generate income but cannot be placed under these heads and hence are included in the last category of “income from other sources”. It usually comprises of revenue sources like lottery prizes, gambling wins, money gifts from people not related to you, interest on securities, Dividend Income and pensions of deceased people received by their heirs.

Tax heads for tutoring jobs
If the money you earn from tuitions is the only source of your livelihood, whether it is from one-on-one tutoring or online tutoring, then that earnings will be taxable under the category of “Income from Business or Profession”. But if there is another primary source of your income like a professional salaried job, income from Business, house, property e.t.c alongside your job as a home-based tutor or online tutor, then your income will fall under the taxation category of “Income from other Sources”.

However, if the amount earned from your tutoring job is of a notable value or higher than your salaried job income then it has to be considered an “Income from the profession”.

How to report your tutor job income?

The first thing that you need to do is chart out your net earnings, that is, add your income and subtract your expenses. Once you are done with that, the next thing you should do is determine which tax head does your income belongs to. In general, it falls under the category of “Income from Business or Profession” or “Income from other Sources”.

Now, the entire process involves a few more steps, which require proper understanding before execution. You are allowed to perform these as an individual on your own without professional aid but it is always recommended that you hire an expert Chartered Accountant who will provide assistance while dealing with taxes and other financial affairs.

What happens if you don’t report this income?

The most common kinds of income that taxpayers generally decline to add in their income tax return are Exempt income, Money gifts, Side Incomes, Income from last employer and Deemed Rental Income. The same thing happens with earnings from tutor jobs.

Not including it in your income report will lead to facing a notice from the Income Tax Department asking you to explain the cause of the absence of your tutor job earnings in your records. Furthermore, any form of underreporting will result in the imposition of a fine of almost 50% of the actual tax amount to be paid. Misreporting charges are 200% of the actual amount.

Hence, reporting the income earned by rendering tutorial services and other teaching sessions is sacrosanct. You should not try to skip any part of it. Abiding by the law will ensure that unnecessary hassles do not knock your door so that you can take your tutoring business to a new peak.

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