Social Media Influencer Taxation- All You Need To Know?

Social media platforms are more than just a source of entertainment; they have accomplished much more than simply bringing people together. It has created an entirely new global career option - that of the social media influencer. A typical social media influencer has a large fan base and followers that they have gained by posting informative and engaging content in the form of posts, stories, and videos on platforms such as YouTube, Facebook, and Instagram, among others. Essentially, social media influencers have an impact on their audience's purchasing decisions, which is exactly what big brands are looking for. Influencers charge a flat fee for such promotions in exchange. They may also be compensated in kind through freebies such as complimentary airline tickets.

Earnings from social media are solely determined by the number of views, number of followers, number of subscribers, engagement of the video, niche of the channel, and traffic source, among other factors, and income earned through any of the aforementioned channels is taxable. Now, the question arises whether or not child influencers on Instagram and YouTube are required to pay taxes. here is all you need to know about social media influencer taxation.

Are the earnings of social media influencers taxed?

Are the earnings of social media influencers taxed?

There was no tax on the income of social media influencers until recently, when the Central Board of Direct Taxes (CBDT) announced that, under section 194R of the Income Tax Act, a TDS of 10% would be levied on freebies and perks worth more than Rs 20,000 received from brands for promotions.

However, the tax deducted at source (TDS) must be paid only if the product or freebie is kept; if the product or freebie is returned to the sponsor after the promotional activity is completed, no TDS will be charged. TDS would apply to items such as vehicles, free tickets, mobile phones, foreign trips, gadgets, and other perks provided by the brand.

The new taxation rules for the influencer industry have been welcomed by the industry. Every influencer is expected to think twice about accepting a brand promotion because they will be required to pay taxes. This will increase trust in the influencer-brand relationship, resulting in increased consumer trust.

How Social Media Influencers are taxed?

Social media influencers who earn money from sponsorships and advertisements are taxed in the same way as freelancers. For tax purposes, influencers who do not fall under the category of corporations or partnerships are considered self-employed individuals engaged in trade or business. Their earnings are taxed at the current slab rates.

Influencers and bloggers who earn more than Rs 20 lakh in a fiscal 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. This is due to the fact that YouTubers, influencers, and bloggers make money from services classified as Online Information and Database Access or Retrieval Services (OIDAR). Under GST, services are taxed at the rate of 18%.

What are the tax implications for social media influencers in India?

• Influencer earnings/income will be taxed under the heading 'income from business or profession'. Each social media influencer is subject to individual taxation at the current slab rates.
• An influencer who earns more than Rs 1 crore in total revenue from business in a fiscal year must have his books audited by a professional. If the cash component of the influencer's earnings/payments is less than 5%, the limit is raised to Rs 10 crore.
• Social media influencers can also deduct certain ancillary business expenses incurred as a result of their influencer activities, lowering their taxable income and tax liability. For example, the cost of filming equipment, such as a camera and microphone; internet and communication expenses; home office expenses, such as rent; and business expenses, such as travel, are all examples of business expenses.

Influencer marketing as an industry will only grow faster in the coming years. The decision to tax them represents a positive change in the government's attitude toward (and acceptance of) the creator economy.