Recently, a list has surfaced containing various well-known social media influencers who are currently being investigated by the income tax department for potential tax fraud. Although the identities of these individuals have not been disclosed, it is clear that tax authorities are taking a firm stance against tax evasion among influencers.
Being aware of taxation rules and obligations is of utmost importance for social media influencers to avoid legal repercussions. Here are the key points that they should keep in mind:
Income tax obligations concerning social media influencers
Social media influencers, being self-employed individuals, must adhere to tax regulations similar to other self-employed professionals. They must file an annual Income Tax Return (ITR) and disclose their complete income, including earnings from sponsored posts, brand endorsements, and product placements.
Sanjiv Bajaj, joint chairman and managing director of Bajaj Finserv, stresses the significance of adhering to tax regulations for social media influencers: “Certainly, the earnings of social media influencers are subject to taxation in India. The income tax department has been actively clamping down on tax evasion by social media influencers in recent times, leading to several notable instances of influencers being detected and facing penalties.”
Social media influencers’ tax rates
The taxation of social media influencers in India has the same structure as that of any other self-employed individual.
Bajaj further adds: “Influencers are obligated to file their annually, and they must disclose all of their earnings, including income from sponsored posts, brand endorsements, and product placements. Additionally, the income tax department mandates influencers to pay the Tax Deducted at Source (TDS) on any gifts or benefits they receive from brands valued at more than Rs 20,000.”
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%.
- Individuals with an annual income above Rs 5 lakh up to Rs 10 lakh: 20%.
- Individuals with an annual income of over Rs 10 lakh: 30%.
For influencers, accurately evaluating their income and fulfilling tax obligations is paramount. Attempting to underreport income or evade taxes can lead to penalties and legal ramifications.
Additional tax implications for social media influencers
In addition to income tax, social media influencers may have to meet other tax responsibilities, such as Goods and Services Tax (GST).
GST: Social media influencers earning more than Rs 20 lakh in a fiscal year must register their services under the GST law. The services offered by influencers fall under the Online Information and Database Access or Retrieval Services (OIDAR) category, subject to an 18% GST rate.
Influencers may also be obligated to pay GST, which is imposed on the value of services they offer, including consulting and training services. Influencers should maintain precise records of their business expenses, travel costs, and other pertinent expenditures to avail deductions and lessen tax liabilities. These records will be crucial during the income tax return filing process and can effectively lower their overall tax burden.
Complying with tax laws as a social media influencer
For social media influencers, understanding and adhering to tax laws is vital to meet their tax responsibilities and avoid penalties or legal complications. Seeking advice from a qualified tax professional or chartered accountant is recommended, as they can offer guidance tailored to their unique financial circumstances and assist them in navigating the intricacies 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.
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