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The Income Tax Department of India has been scrutinizing unreported income from social media websites. Lakhs of notices have been sent to salaried individuals for moonlighting and non-reporting of such income. There is still a lot of confusion around the taxation of social media income. This guide explains all that you need to know about taxation of social media related income.
With the advancement of technology and the increasing number of people using the internet, the use of social media has increased drastically. Now, it has become possible to create content over social media and monetize it. In other words, social media has become a passive or an active source of income for various individuals. Having said that, the next question that arises is, will this income be chargeable to tax? If yes, how and under what head?
As per reports, the earnings from social media are more than even mainstream income in some cases. Therefore, the income tax department has been investigating those who have not reported their social media income while filing their ITR. Several notices have been sent to social media influencers for evasion of taxes. Therefore, it is important to understand the tax implications of social media income.
People earning income from social media websites are required to report such income under the applicable head. Such individuals have to comply with tax regulations in a manner similar to that of self-employed professionals. You must file your ITR and ensure that you disclose your complete income, including income from sponsored posts, product placements, and brand endorsements.
Moreover, the income tax department has been cracking down on social media tax evaders. Therefore, if you are someone who earns from social media, you must ensure that you report such income and pay taxes on it as per the applicable rates.
The income from social media will be taxed on the basis of the level of activity and the quantum of income. For example, the head under which the social media income will be taxed will depend on the amount of income and whether it is the primary source of income or a secondary source of income. Social media income can be classified under two heads -
Income from Business/Profession
If the individual is engaged in full-time content creation for social media and it is his/her primary source of income, in that case, the social media income will be taxed under the head income from business/profession. Also, if the income from social media exceeds the income from the primary income source, it is deemed as income from a business/profession and taxed as per the rates applicable to business income.
If an individual’s social media earning is not his/her primary source of income and is earning casually, this income is classified as income from other sources. Also, if the amount of income is not substantial, the social media earning is treated as income from other sources.
There is no special rate at which social media income is taxed. The tax rates depend on the head under which social media income is classified. For example, if the social media income is classified as income from business/profession, then it is taxed as per the income tax slab rates. Similarly, if the social media income is classified as income from other sources, it is taxed accordingly.
Individuals earning income from social media have to file their ITR annually and report their earnings. As per the Income Tax Act, any benefits or gifts exceeding Rs.20,000 received from brands are subject to a deduction of TDS.
Given below are the tax rates applicable for individuals under the old and the new tax regimes -
Income Tax Slab Rate for New Tax Regime
| Income Range | Tax Rate |
|---|---|
| Upto 3,00,000 | Nil |
| 3,00,000-6,00,000 | 5% |
| 6,00,000-9,00,000 | 10% |
| 9,00,000-12,00,000 | 15% |
| 12,00,000-15,00,000 | 20% |
| Above 15,00,000 | 30% |
Income Tax Slab Rate for Old Tax Regime
| Income Range | Tax Rate |
|---|---|
| Up to 2,50,000 | Nil |
| 2,50,000-5,00,000 | 5% |
| 5,00,000-10,00,000 | 20% |
| Above 10,00,000 | 30% |
As per the Income Tax Act, the rules for claiming deductions under income from business/profession and income from other sources head are different. Only the expenses incurred directly or wholly for the purpose of generating that particular income are deductible if the income is taxed under the head income frm other sources.
However, in the case of business income, the expenses incurred for the operation of the business are also eligible for deduction along with those incurred directly for generating that income.
For example, the cost of the set-up used for recording a video for YouTube or a reel for Instagram will be considered business expenses and can be deducted in case of both business income and income from other sources. Similarly, the cost of acquiring a blue tick on X(Twitter) is not directly related to the generation of income. Therefore, it cannot be categorized as income necessary for generating the said income and will not be eligible for deduction as an expense under the head income from other sources.
As per the GST Act 2017, if the annual income of an individual exceeds Rs.20 lakhs (Rs.10 lakhs in specified states), then the individual must register under GST. GST is applied at @18% on the services offered by registered individuals.
GST registration becomes mandatory only if the annual income crosses the specific threshold, i.e., 20 lakhs.
The services provided by bloggers, YouTubers, and influencers are categorized as OIDAR (Online information and database access or retrieval services). This consists of the services that make use of technology to distribute data online.
Given the current scenario and the government’s strictness on unreported social media income, it has become extremely important to be aware of the taxability of such income and make sure that it is reported correctly in the ITR. If you still have any confusion, you can book an eCA from Tax2win to get expert advice.
Yes, any income earned from YouTube is subject to tax at the applicable slab rates. If your YouTube channel is your primary source of income or forms a substantial part of your overall income, then it is taxed as income from a business/profession. Similarly, if the YouTube channel is a side source of income, it is taxed under the head income from other sources.
Under the GST Act 2017, social media marketing services are covered under OIDAR (Online Information and Database Access or Retrieval Services). These services are subject to a GST @18%. However, GST is applicable only if the annual income exceeds Rs.20 lakhs.
Google Pay is a means to facilitate the payment and receipt of income and is not a separate source of income. The money received through Google Pay is taxable in the same way in which the non-UPI receipts are treated and taxed.
