The number of social media influencers in the country is rapidly increasing. Today, thousands of people are earning lakhs of rupees through platforms like Instagram Reels, YouTube videos, and Facebook posts. If you are also earning income through social media platforms, this news is particularly important for you.
The number of people earning through Instagram Reels, YouTube videos, and Facebook posts is growing rapidly in India. Social media is no longer just a means of entertainment; it has become a significant career option. However, if you are earning money through Reels or brand deals, it’s crucial to note that the government is now becoming stricter on social media influencers regarding income tax. Failure to accurately declare your income in your Income Tax Return (ITR) can result in hefty penalties and legal action.
Which Influencers Are Subject to Tax?
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Anyone earning money through platforms like Instagram, YouTube, Facebook, or other digital platforms – whether through Reels, brand promotions, affiliate links, or YouTube AdSense – is subject to tax. Even if you receive free gifts, gadgets, or hotel stays, this is considered income and must be declared in your ITR.
Reporting Income Above ₹50,000 is Mandatory
If your social media income exceeds ₹50,000 in a year, it must be declared as “business or professional income” in your Income Tax Return. Tax experts state that this threshold triggers the need for registration and tax payment.
Consequences of Concealing Income
The Income Tax Department is closely monitoring digital earners this year. Individuals who have earned lakhs of rupees through social media but have not filed their returns or provided complete information may receive notices. In addition, penalties of up to 200% can be imposed if tax evasion is proven.
Tax Rules Applicable to Social Media Creators
The Income Tax Department considers social media content creators as self-employed or business professionals. The following tax rules apply:
- Section 44ADA or 44AB: Gross income up to ₹50 lakh is taxed under simplified rules for professional income, with 50% of the income considered as a benefit.
- Section 194R: If a brand or company gifts an influencer more than ₹20,000, the company is required to deduct 10% TDS.
- Section 194J: 10% TDS is deducted on payments made for professional services, such as brand deals and promotional fees.
- GST Liability: If your annual income exceeds ₹20 lakh, you must also register for GST and charge 18% GST on all services.
Benefits of Filing an ITR
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- Legal Protection: Filing your returns on time and accurately can prevent notices from the tax department.
- Easier Loan Approvals: Filing an ITR strengthens your financial standing, making it easier to obtain home loans, car loans, etc.
- Convenience for Foreign Travel: During visa applications, a copy of the previous ITR is often requested.
- Financial Transparency: A systematic financial record helps with future investment plans and business ventures.
How to Calculate Taxes
It’s essential to keep a record of all sources of income from social media, such as money earned from brand deals, commissions from affiliate links, advertising income from YouTube, free trips or gadgets, and sponsored posts.
You can also deduct business expenses like internet, camera, mobile phone, and editing software from your income. The remaining profit is then subject to tax.
Old vs. New Tax Regime: Which to Choose
Influencers have two tax options:
- Old Tax Regime: Allows for claiming various deductions and exemptions, such as Section 80C and 80D.
- New Tax Regime: Offers lower tax rates but does not provide any exemptions.
It’s advisable to consult a tax advisor to choose the best option based on your income, expenses, and investments.
Increased Awareness, Increased Responsibility
The government and the Income Tax Department now expect transparency from digital professionals as well. As it has become easier to earn digitally, it’s equally important to fulfill the associated responsibilities. Therefore, if you are a YouTuber, Instagrammer, Facebook creator, or blogger and earn income through these platforms, adhering to tax regulations is crucial for both you and your brand’s reputation.
