The advent of social media in recent years has revolutionized the way we interact, connect, and even do business. For many people, social media sites such as Instagram, YouTube, TikTok, and others have become a source of revenue as well as a way of expression. Social media influencers that create compelling content and have a large following often earn a lot of money from brand collaborations, sponsorships, and advertising revenue. However, many influencers may underestimate the significance of understanding and adhering to income tax standards in India. In this article, we’ll look at how social media income is taxed in India, including tax requirements, rates, additional ramifications, and how influencers can stay tax compliant.
Table of Contents
- Influencer Income Tax Obligations
- Influencers income classification and Tax Rates
- Tax Implications for Social Media Influencers
- Complying with Tax Laws as a Social Media Influencer
Influencer Income Tax Obligations
Identifying your residential status is the first step in comprehending your tax liabilities. In India, your tax liability is determined by whether you are a resident or a non-resident. Residents are taxed on their whole income (income in India as well as the global income), whilst non-residents are solely taxed on their Indian income.
Brand collaborations, sponsored content, affiliate marketing, and advertising revenue are common sources of money for social media influencers. In India, all of these sources of income are subject to income tax.
Influencers must file correct and timely income tax returns. Individuals in India normally have till July 31st to file their income tax forms or 30th September based on whether they are in need of audit under statutory law.
Social media influencers can claim deductions under different sections of the Income Tax Act, including Section 80C for tax-saving investments, Section 80D for health insurance premiums, and Section 10(14) for dwelling rent allowances, among others.
Influencers income classification and Tax Rates
If the main source of income for any person or entity is solely based on influencer and they are engaged in this activity majorly, this income shall be classified as income from business & profession.
The tax rate is based on a normal slab if you are an individual, if you are a company or firm the corporate tax rate applies in that case. Refer this income tax page of Government of India for tax slab and rates information.
Tax Implications for Social Media Influencers
If your annual income from social media surpasses ₹ 20 lakhs (or ₹ 10 lakhs in some special category states), you may be obliged to register for Goods and Services Tax (GST). Services offered by social media influencers are subject to GST. If you receive money from outside India, in that case you must register under GST irrespective of your any limit.
To avoid penalties, if your projected tax liability for the fiscal year exceeds ₹ 10,000, you must pay advance tax in installments. However, in certain cases such as when you adopt for presumptive taxation scheme, you can pay advance tax once that is by 15th march of the financial year end.
Tax on Gifts and Freebies
Influencers who get promotional gifts or free products should be mindful of the tax ramifications. Such products’ fair market value may be assessed as income.
Complying with Tax Laws as a Social Media Influencer
To ensure compliance with Indian tax rules, social media influencers should do the following:
Keep detailed records of all income and expenses incurred as a result of your social media efforts. Invoices, receipts, and bank statements are examples of this.
Consult a Tax Advisor
Seek professional counsel from a tax specialist who specializes in individual income tax. They may assist you in understanding your tax liability, claiming deductions, and ensuring appropriate filing. Tax Vic can be your perfect place to consult a tax expert.
Book Free 20 minutes consultation with CA Reetu.
File Returns on Time
To avoid penalties and interest, make sure you file your income tax forms by the due date.
Keep up to date on changes in tax rules and regulations, which can differ from year to year.We may not have the time and energy to devote to remaining updated with tax changes etc. For this having an active tax consultant is a must who you can trust and who helps you run business without stress.
As social media continues to play an important role in our lives, the income generated by these sites is also taxed. To maintain compliance with the law, social media influencers in India must be aware of their tax duties, rates, and other repercussions. The best thing to do is have a tax consultant who takes care of your taxes and also helps you save taxes legally in the long run. Book free 20 minutes Tax Consultation with CA Reetu who is already helping several individuals and entities in India run their personal and business finances.