Tax implications on social media influencers and its calculation
Social media influencers generate large numbers of followers by posting regularly to their favorite platforms, such as YouTube, Instagram, Facebook, and Snapchat. Influencers are taxed in the same way as any other money-making individual or organization. Influencers, other than corporations and partnerships, are classified as independent natural persons or persons carrying on a business or commercial activity as sole proprietors for tax purposes.
Income from influencers is generally considered business income subject to standard income tax, except for those which are subject to final tax, or are excluded from taxation under existing rules. Any amount received, in monetary or other form, from YouTube partner programs, sponsored social media posts and blogs, display ads, to become a brand representative or ambassador, affiliate marketing, co- creating project lines, promoting own products, photo and video sales, digital courses, subscriptions, eBooks, podcasts and blogs are all examples of corporate income subject to tax on regular income. With the increase in the level of creativity, the above mentioned forms of advertising tend to transform.
The income of influencers is subject to income tax under the heading “Profits and gains from a business and a profession”. The income of individual influencers is taxed at the prevailing slab rate. Influencers who earn more than Rs 1 crore in total gross income in a fiscal year are subject to a tax audit of their books. If no more than 5% of all payments as well as 5% of all receipts for that fiscal year are made in cash, the maximum has been increased to Rs. 10 crore. Withholding tax (TDS) may apply to payments made to influencers under the Income Tax Act. The TDS rate will be determined by the nature of the service provided or the type of transaction carried out (TaxSlayer).
Under the Goods and Services Tax (GST) Act, YouTubers, Influencers, and Bloggers’ services are classified as Online Information and Database Access or Retrieval (OIDAR) services. . In other words, they are services that use information technology to disseminate data via the Internet or by means of an electronic network. If an influencer’s turnover exceeds Rs.20 lakh in a fiscal year, or Rs.10 lakh if based in a special category state, they must register under the Act on the GST. GST is charged at the rate of 18% on services provided by GST registered social media influencers and bloggers.
Depending on whether the supply is intra-state or interstate, 9% each of the central tax (CGST) and state tax (SGST) is imposed, or 18% of the integrated tax (IGST). When it comes to exporting services, the GST rate is 0%. Social media influencers who want to export their services have two options. They can either export services by providing a Letter of Commitment (LUT) or pay the IGST and claim it later as a refund. The supplies are zero-rated in advertisements placed on platforms such as Google Inc. and Google AdSense, which are widely used by influencers because the recipient of these services is located outside of India.
You can deduct your business expenses from your income to reduce your taxable income, which will reduce your taxes payable. Possible examples of what can be inferred as a social media influencer include filming expenses like cameras, microphones, and other equipment; software subscription and license fees; internet and communication costs; home office expenses, such as rent and utilities; Office supplies; business expenses such as travel or transportation costs and others. Your expenses are only tax deductible when they are “ordinary and necessary” for your employment as an influencer.
From understanding the need and importance of social media and influencer marketing to the different taxes and its calculation matrices, the article reveals the different aspects related to the influence tax on social media. The future of marketing definitely revolves around social media.
(Ruchika Bhagat is Managing Director (MD) of Neeraj Bhagat & Co., an ISO 9001: 2008 UKAS certified organization, founded in 1997. Ruchika graduated in 1996, Fellow of the Institute of Chartered Accountants of India (ICAI) since 1998. She specializes in business advisory, tax, regulatory and risk advice. She is a strategic advisor in setting up businesses in India for foreign companies and ensuring compliance.)