Today, social media influencers have emerged as a major factor in how brands can reach out to their target population. From Instagram to YouTube and every other platform that exists today, influencers are today’s strong marketing communication agents, and like every other asset, they will have to pay their taxes. If you are a blogger or YouTuber in India or looking forward to becoming one, you should know the ways in which your earnings will be taxed and your tax liability.
Here, you will learn about the taxation of influencers in India, including what kind of taxes influencers have to pay, the legal regulation of income received by influencers, and how to avoid unwanted situations with the tax service.
Income of the Influencer in India
Today people known as influencers in India are paid for different things including through brand endorsements and sponsored posts, affiliate marketing services and other web services. The earning criteria may differ depending on the particular portal and the type of work; people might earn anything from 10000 to lakhs per month. Let’s look at the common sources of income for influencers:
1. Sponsored Posts, Collaborations & Partnerships: Influencers are paid through brands that ask them to make posts with their products or services. Such payments are often made on a one-time basis or on the basis of any number of posts.
2. Affiliate Marketing: Influencers leave hyperlinks or some unique code in his or her comm independence products or services. They profit when their followers buy something through those links, for which they receive a commission.
3. Ad Revenue: Most social media apps such as YouTube, Instagram, and Facebook enable influencers and content creators to monetize the advertisements displayed on videos or posts.
4. Product Sales: Some influencers sell their merchandise, courses, or digital products and earn profits from their sales.
These income sources need to be reported for tax purposes, even if the overall amount is little or a lot, by the influencers.
Taxation for Influencers: An Overview
In India, influencers fall under the category of “professionals” in terms of the Income Tax Act. What this means is that the income that is earned by celebrities is under the same tax bracket that other professionals such as doctors, lawyers or consultants earn.
Income Tax
Influencers must declare the income earned, and the Tax Law bars him or her from avoiding paying income tax like any other individual taxpayer. The income is separated as Business income or other income, as the case may be in its receipt.
Income from Business & Profession
If the influencer is managing their page like a business and where they are generating good returns, their earnings will be considered business income. The influencer also benefiting from discussions has a chance to put all the necessary equipment and bills for internet connection and all other work-related costs as deductions.
Income from Other Sources
If the income received by the influencer is irregular or sporadic, then they qualify as income from other sources. However, this classification is very limited and can be used only if a person who earns on an influencer does not approach this activity as a business.
Tax Slabs for Influencers
India currently has a progressive tax slab structure, which means that tax pay increases with income. For the Financial Year 2023-24, the income tax slabs for individuals below 60 years are as follows:
| Income Range (₹) | Tax Rate |
| Up to ₹2.5 lakh | Nil |
| ₹2.5 lakh to ₹5 lakh | 5% |
| ₹5 lakh to ₹10 lakh | 20% |
| Above ₹10 lakh | 30% |
For influencers earning significant amounts, these tax rates apply after considering any deductions or exemptions available.
Goods and Services Tax (GST) for Influencers
Subsequently, while influencers perform service delivery, they are required to make payments towards GST on income as well. Basically, any services that have been rendered are subjected to GST; this includes promotional/marketing services offered by influencer accounts.
GST Registration Requirement
According to the value limit set by the government of India, anyone who earns more than ₹ 20 lakh annually as an influencer with his work, including Field Marketing/Sales/ Promotional, etc., he or she must obtain GST registration if the income is over ₹ 10 lakh in the special States, including Meghalaya, Manipur, Sikkim, Mizoram, Tripura, Himachal Pradesh, Uttarakhand, Influencers registered under the GST will have to include GST on their services as a percentage of the brands or sponsors they work with (at a rate of 18%).
GST on Affiliate Marketing
Anyone participating in affiliate marketing must also collect GST on the income because such activity also falls under services. However, if the sum total of such earnings is below the GST threshold, then the influencer will not be able to register for GST.
Input Tax Credit (ITC)
The influencers who have registered under GST can claim credit for the GST paid on expenses incurred for business purposes like social media marketing software, professional equipment, or even internet connection. This, in a way, minimizes the total amount of taxes that have to be paid to the government.
Deductions and exemptions Available for influencers
Influencers can optimize they can benefit from a wide range of deductions and exemptions. These are important instruments to decrease the general burden of taxes.
1. Business Expenses
Any time an influencer engages in social media activities as a business, he or she is allowed to offset costs used in the production of the income. These include:
- Equipment Costs: Laptops, cameras, lighting and other equipment, clothes for the models.
- Home Office Expenses: If the influencer works from home, then some amount should be paid for, such as rent, electricity, and internet bills.
- Professional Fees: Expenses for services in relation to their responsibilities provided by accountants, consultants or other specialists.
2. Section 80C – Investments
The social media influencers can freely use the PPF, NSC or EPF to cover the maximum limit provided under Section 80C of the Income Tax Act, which is up to ₹ 1.5 lakhs.
3. Section 80D
The influencers can also claim an exemption for the premium amount paid for health insurance under Section 80D.
Tax Filing for Influencers
Annual taxes are paid with the help of the Income Tax Department and like any regular citizen, influencers need to do it as well. Here’s a simplified process:
Step 1: Maintain Accurate Records
Record related to money, be it from brands with whom businesses collaborate and from affiliates as well as advertisements. Also, preserve receipt of expenses reasonably associated with business operations.
Step 2: Apply for GST registration (If you are eligible)
If the influencer has an annual turnover of more than the GST, then the influencer has to register for GST along with GST and file for the same.
Step 3: File Income Tax Return (ITR)
ITR-3 for professionals or ITR-4 in case the influencer opts for a presumptive taxation scheme has to be filed by the due date of filing of a return, which is generally July 31st of the assessment year.
Step 4: Pay Taxes
As per the declared income, the influencers should either deposit the taxes through the advance tax system, if it exists, or at the time of filing their tax returns.
FAQ
Q: What is section 194R of the Income Tax Act of 1961?
A: Section 194R requires influencers to deduct tax on benefits or perks from brands. This includes any form of incentive given by businesses in the form of cash or otherwise for the purpose of advertising, such as P.R. packages or free products.
Q: In what circumstances does section 194R impose a tax on social media influencers?
A: The provision comes into play when the grossed-up value of benefits accruing from a brand in a financial year exceeds INR 20,000.
Q: In what way does the new taxation rule impact brands engaging with influencers?
A: Influencers’ taxes can only be paid by making brands deduct the taxes on the products they are sending to the influencers. They should be able to record products that are supplied and returned and always ensure they choose the right influencers to work with.
