In a recently revealed list, several prominent social media influencers have come under scrutiny from the income tax department for potential tax fraud. While the names of these individuals remain undisclosed, it is evident that tax authorities are cracking down on tax evasion by influencers.
As a social media influencer, it is crucial to be aware of the taxation rules and obligations to avoid any legal consequences.
Here are the key points that social media influencers should keep in mind regarding taxation.
Income Tax Obligations For Social Media Influencers
Social media influencers are considered self-employed individuals, and their taxation follows a similar framework as other self-employed professionals. It is mandatory for influencers to file an income tax return (ITR) every year and declare their complete income, including earnings from sponsored posts, brand endorsements, and product placements.
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Sanjiv Bajaj, joint chairman and managing director, emphasises the importance of complying with tax regulations for social media influencers:
“Yes, the earnings of social media influencers are taxed in India. The income tax department has been cracking down on tax evasion by social media influencers in recent years, and there have been a number of high-profile cases of influencers being caught and penalised.”
Tax Rates For Social Media Influencers
The taxation of social media influencers in India works in a similar way to the taxation of any other self-employed individual.
Adds Bajaj: “Influencers are required to file an income tax return (ITR) every year, and they must declare all of their income, including income from sponsored posts, brand endorsements, and product placements. The income tax department also requires influencers to pay a tax deducted at source (TDS) on any freebies or perks that they receive from brands worth more than Rs 20,000.”
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The tax rate for social media influencers in India depends on their income bracket.
- Individuals with an annual income of up to Rs 2.5 lakh: nil.
- Individuals with an annual income above Rs 2.5 lakh up to Rs 5 lakh: 5 per cent.
- Individuals with an annual income above Rs 5 lakh up to Rs 10 lakh: 20 per cent.
- Individuals with an annual income of more than Rs 10 lakh: 30 per cent.
It is important for influencers to accurately assess their income and pay taxes accordingly. Underreporting income or evading taxes can result in penalties and legal consequences.
Additional Tax Implications For Social Media Influencers
Apart from income tax, social media influencers may also have to fulfil other tax obligations, such as Goods and Services Tax (GST).
GST: Social media influencers who earn over Rs 20 lakh in a fiscal year need to register their services under the GST law. Services provided by influencers are classified as Online Information and Database Access or Retrieval Services (OIDAR), which are subject to an 18 per cent GST rate.
Influencers may also be liable to pay this tax, which is levied on the value of services they provide, including consulting services and training services.
In order to claim deductions and minimise tax liabilities, influencers should maintain accurate records of their business expenses, travel expenses, and other relevant expenditures. These records will be essential while filing the income tax return and can help reduce their overall tax burden.
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Complying With Tax Laws As A Social Media Influencer
Understanding and complying with tax laws is crucial for social media influencers to ensure they meet their tax obligations and avoid any penalties or legal issues. It is advisable to consult a qualified tax professional or chartered accountant who can provide guidance specific to their financial situation and help them navigate the complexities of taxation.
By staying informed and adhering to tax regulations, social media influencers can build a sustainable and legally compliant business while contributing their fair share to the country’s revenue. It is always advisable to be proactive and compliant rather than face the consequences of non-compliance.
