In India, AdSense income earned from a YouTube channel or a blog is totally taxable. The income from Google Adsense is entirely taxable in India.
The amount that you receive is your income and is FULLY taxable as per Indian income tax laws.
When Google pays bloggers, they won't, deduct taxes (TDS) like Indian firms do for their employees. Because you and the AD network company (in our example, Google Adsense) have no employer-employee connection, they are not obligated to deduct TDS.
You must include this money in your overall income and pay taxes to the Indian government.
Income Tax treatment of AD Income From Blog/website
There are two group that you may fall into:
1. Main business is running your on blog/website/YouTube channel
If blogging or maintaining a website is your full-time job and primary source of income, the earnings should be classified as "Income from Business or Profession" for tax purposes. Current you have to file ITR-3 for this.
This effectively means that you are operating a business as a corporation or as a sole proprietorship. You are able to deduct all of the expenses you incur in order to produce ADS income.
2. You work as an employee with a company and doing part time blog/website income
This is the most common scenario, and it is likely that most people will fall into it. It never hurts to establish a blog part-time in order to supplement your normal income. However, the income you earn from this part-time job is taxable as well.
If you are employed, you will get your monthly salary after the TDS has been deducted (tax deduction at source). However, this tax is only assessed on the percentage of your wage that you receive.
Declare this part-time income as "Income from Other Sources" in your tax records for the best results. This sum is added to your taxable income, and the tax due is computed according to your tax bracket.
Obviously, you can deduct any expenses you incurred in order to acquire this revenue. The identical example that I used in the previous paragraph applies here as well.
After deducting all expenses, you should report the NET profit as "Income from Other Sources" on your income tax return.
