Taxation of YouTubers and Social Media Influencers

What are the Sources of Income for YouTubers and Social Media Influencers?

YouTubers and Social Media Influencers have various sources of income. Here are some common sources of income that YouTubers and Social Media Influencers have.

• Advertising Revenue Earnings from ads displayed on social media platforms like YouTube, Instagram, etc, form an important source of income for influencers.
• Sponsorships and Brand Collaborations Social media influencers often collaborate with brands and companies to promote their products on digital platforms among their followers. These influencers receive payments for promoting the brands, products, and services.
• Affiliate Marketing Social media influencers also earn money from promoting products and services through affiliate links.
• Content Creation Income earned from creating content for brands, including video production, writing, and photography.
• Chats and Donations Earnings from super chats and donations received from followers, such as through YouTube’s super chat feature.
• Merchandise Sales Revenue earned from selling branded merchandise or products directly to followers.

---

Taxable Income and Income Tax Provisions Applicable

All the income earned from different sources of income is taxable in India under the Income Tax Act. This income is generally considered business income or income from a profession.

In other words, the income earned by YouTubers and influencers is generally treated as the income from a business or profession under section 28 of the Income Tax Act.

The income is taxed at the applicable slab rates for individuals. If the income exceeds Rs. 50 lakhs, an additional surcharge or cess might be levied.

---

Deductions and Expenses Allowed to Social Media Influencers

Allowable Expenses - Influencers can claim deductions for expenses incurred in generating their income. Some expenses for which the influencer can claim a deduction are

• Equipment costs (cameras, microphones, computers)
• Internet and electricity costs
• Content production costs (editing software, graphics)
• Rent for studio space or home office
• Travel expenses related to content creation
• Marketing and Promotional expenses
• Depreciation

---

GST Provisions for Influencers

If the annual GST turnover exceeds Rs. 20 lakhs (Rs. 10 lakhs in special category states), then the YouTubers and influencers are required to register for GST.

Services provided by influencers, such as sponsorships and brand promotions, are subject to a GST of 18%.

Input Tax Credit (ITC) - Registered influencers claim ITC on the GST paid for business-related purchases.

---

Tax Deducted at Source (TDS)

• Section 194J: Payments received by influencers on account of professional services are subject to TDS under section 194J at 10%.
• Section 194C: Payments received for contracts or specific projects will attract a TDS of 1% under section 194C.
• Section 194R: This section is applicable to the freebies, gifts, and benefits received by influencers whose value exceeds Rs. 20,000 during the year. Such income earned, whether in cash or in kind, is subject to a TDS at 10%.

---

International Income

• Foreign Income: The income earned by influencers from foreign sources, such as foreign sponsorships, ads, etc, is taxable in India. They can claim relief under the DTAA (Double Taxation Avoidance Agreement), if applicable.
• Remittance of Foreign Income: Influencers are required to report their foreign income while filing the Income Tax Return (ITR) in India.

---

Filing of Income Tax Return (ITR)

• ITR Forms: Influencers are required to file their ITR based on the nature and amount of their income. Individuals and HUFs having income from business or profession are generally required to file ITR-3. Similarly, those who have opted for the presumptive taxation scheme must file ITR-4.
• Presumptive Taxation Scheme: Influencers with an annual turnover upto Rs.2 crores can opt for the presumptive taxation scheme and file ITR-4. Under this scheme, 50% of the gross receipts are considered as taxable income, and they are not required to maintain detailed accounts.

---

Compliance and Record Keeping

Under the Income Tax Act, it is important to maintain proper records of all accounts. Influencers are required to maintain proper books of accounts if their income is more than Rs. 2.5 lakhs and have not opted for the presumptive income scheme. It is important to file ITRs timely to avoid legal issues and penalties.

If the taxpayer fails to comply with tax filing and GST registration, they can attract penalties, interest on tax dues, and any possible scrutiny by tax authorities. The income earned by social media influencers is subject to tax under Indian law.

---

Things to Consider for Influencers Before Filing Returns for FY 2024-25

Here are a few points that you must keep in mind before filing returns for FY 2024-25 -

Verify AIS and Form 26AS

Once you gather all your documents, you need to tally them with AIS and Form 26AS. If there is any discrepancy in the statement, you must reach out to the deductors to rectify the mistake.

Choose the Correct ITR Form

While filing your ITR, it is important to ensure you choose the correct ITR form. Choosing the wrong ITR form might attract notices, penalties, and lead to delays in the processing of ITR. Tax2win’s AI-integrated ITR filing system automatically selects the appropriate ITR form based on your income source and ensures accurate ITR filing.

Declare All Incomes

Make sure to carefully review your bank statements, emails, Annual Information Statement (AIS), and Form 26AS to accurately calculate your total income for the year. Failing to report income from any source can lead to notices from the Income Tax Department.

Claim Deductions You Are Eligible for

Although you don't need to upload documentary proofs while filing your income tax return, it's important to keep all supporting documents safely to justify your deduction claims if required later. Also, make sure not to claim deductions you're not eligible for, as incorrect claims can lead to scrutiny or penalties.

Verify Your Returns Within 30 Days

The final step in filing your income tax return is e-verification, which is mandatory for everyone. You must verify your return within 30 days of online submission. This can be done either online (using methods like Aadhaar OTP, net banking, etc.) or by sending a signed physical copy of Form ITR-V to the Income Tax Department’s CPC in Bengaluru within the 30-day window.

Are you a social media influencer looking to minimize your taxes? Look no further! Our tax experts can not only help you maximize your tax savings but also help you file your ITR accurately and ensure you stay tax compliant. From tax planning to tax filing, our experts provide end-to-end tax-related services tailored to your needs. Simply hire a tax expert and experience a seamless tax journey. Book an Online CA now!

---