Taxation for Influencers

Introduction

In today’s digital era, influencers have become an integral part of the online landscape, wielding significant influence over their followers and shaping trends across various industries. With the rise of social media platforms and the increasing popularity of content creation, it is essential for influencers to have a comprehensive understanding of Taxation for Influencers to ensure both financial efficiency and compliance with the law. Due to a tax raid that took place on well-known YouTubers in Karela on June 22, this blog is extremely important. The raids took place in various districts, namely Ernakulam, Pathanamthitta, Thrissur, Alappuzha, Kottayam, and Kasargod.

Taxation on Influencers from GST point of view:

Influencers and bloggers who earn more than Rs 20 lakh in a financial year or Rs 10 lakh if they live in a special category state must register their services under the Goods and Services Tax (GST) law.  Under GST, services are taxed at the rate of 18%.

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Taxation on influencers from the income tax point of view :

TDS on Freebies and Incentives

The Central Board of Direct Taxes (CBDT) has announced a 10% TDS on freebies and incentives valued over Rs 30,000 received from businesses for promotions under section 194J of the Income Tax Act. This TDS is only applicable if the product or freebie is kept; if it is returned after the promotional activity, no TDS will be applied.

Taxable Items Under the New Rule

TDS will be applicable to various promotional items such as automobiles, complimentary tickets, mobile phones, international travel, gadgets, and other benefits offered by the brand.

Tax Treatment of Influencer Earnings

Earnings from influencer activities will be taxed as “income from business or profession,” with existing individual tax slab rates applying.

Audit Requirements for Influencers

Influencers whose firms generate more than Rs 1 crore in income in a fiscal year are required to undergo a professional book audit. This cap increases to Rs 10 crore if the influencer’s cash component of earnings or payments is less than 5%.

Deductions for Business Expenses

Social media influencers can reduce their taxable income and tax obligation by deducting certain business expenses related to their influencer activity. Deductible expenses include costs for shooting equipment, internet services, home office rent, and other business-related expenses.

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Conclusion

Influencers are considered self-employed individuals and must report their earnings accordingly. They have the advantage of claiming tax deductions for business-related expenses such as equipment, home office costs, marketing, travel, and professional services. Additionally, influencers may need to navigate sales tax obligations based on their location and the nature of their products or services. The recent incident of an income tax raid on social media influencers has changed the scenario for all influencers in India.