Income Tax on Selling website

The price that you may get in return might be in multiples of 7  to 31 times depending on the future earning capability. A buyer will certainly look at future prospect not from what that site had earned in past (still we prefer the past data as it gives us a insight of what may be the probable profits). Now in case you have made your mind to sale your website the major problem is related to FEMA, bank and Taxation. One should be careful enough to follow the rules of the land and respect them.

Bank : Generally bank will question you over the source of income and all that . It is your duty to explain them in clear. Why and how are you generating this money. You might have to give this in written or as per instructions of bank(if the sum that you are receiving is in 1000's of dollars). It is nothing serious you have to approach bank and clear the matter.

Income tax : Actually the taxation part on selling a website is complex and still disputed, chartered accoutants have different views on it some say it might be taxed as capital gain while other say it can be treated as business income here are some plots that you need to consider :


Are you into buying and selling  / flipping sites on regular basis ?

Yes, then it would be considered as business income as it is regular process and as per definition of business it means that any continuous or systematic or organised activity carried on with the intention to earn profits. Even a single transaction can be business if it is aimed at earning profit.

If you make and sell website : Then it would be considered as business income the sale of the website would be considered as on revenue account and would be taxable in the normal manner.


If you don't do any of the above thing then it would be considered as "capital gain" and would be taxed as per.

Now question arises what about the costs that i incurred in making this site and how to deduct those costs  improvement and development.if you had bought it from other person you can deduct that amount and show the necessary proofs like transferred amount at the time of purchase, but if you had made the website and now selling it  then the cost of improvement and development should be supported with proper documents.