With changing tax laws, influencers are often seen juggling creativity with commerce. In this chaos, managing taxes can be overlooked, and that can have serious repercussions. Smart tax planning for influencers in India is the answer to all the confusion.
In this guide on tax for social media influencers, learn all you need to know. From understanding what and how is taxed, to tax saving tips, we help you take charge of your finances and maximize your earnings.
Understanding Influencer Income & Tax Implications
Influencers in India have multiple income streams. Each of these income sources may be treated differently for tax purposes. Let’s take a overview of the tax essentials for social media influencers:
Types of Income for Influencers
- Sponsored Content: Payments received from brands for promoting their products or services via social media posts, blogs, or videos.
- Affiliate Marketing: Commission-based earnings from promoting products using personalized links, where the influencer earns a percentage from each sale.
- Ad Revenue: Earnings from platforms like YouTube or Instagram, where influencers earn money based on views, impressions, or engagement with ads.
- Product Sales: Revenue from selling merchandise, courses, or any digital products like e-books, which influencers may create and sell directly to their audience.
- Brand Partnerships: Long-term collaborations or ambassadorship deals with brands.
- Event Appearances: Fees earned from speaking or hosting events related to their expertise or niche.
Taxes Applicable to Influencers
Income Tax:
Income Tax is the primary tax on an influencer’s total earnings in a financial year. The earnings from all sources (mentioned above) are treated as taxable income – as Business or Professional Income
Influencers are taxed based on their total income, following the applicable income tax slabs.
Goods and Services Tax (GST):
If an influencer’s gross annual earnings exceed INR 20 lakhs (or INR 10 lakhs in northeastern states), they are required to register for GST.
GST on Services: Influencers provide services (like sponsored content) and must charge GST (18%) on these services, making it necessary to issue proper invoices.
Tax Deducted at Source (TDS):
Section 194R of the Income Tax Act mandates a 10% Tax Deducted at Source (TDS) on non-monetary benefits exceeding INR 20,000 received by influencers.
This can include items such as free products or services provided by brands.
Influencers need to account for these benefits as part of their taxable income, which can increase their overall tax liability
Other Taxes:
Apart from the taxes discussed above, influencers may also have to pay the following taxes:
- International income tax on foreign earnings
- Capital gains tax on investment earnings
- State specific taxes
Also Read:
Tax Planning for High Net Worth Individuals
Essentials of Filing Taxes as an Influencer
With multiple sources of income and various tax implications, it’s essential to understand the key aspects of tax filing. Here are the essentials:
Determine & Classify Your Taxable Income:
Earnings from all sources, whether paid in cash, bank transfer, or kind (e.g., gifts), is taxable and needs to be reported.
Influencer income is generally classified as “Income from Business or Profession” if they work independently or are self-employed.
For income not directly tied to your business, such as interest income or gifts not related to promotional activity, it will be classified as “Income from Other Sources.”
Applicable ITR Form:
Influencers typically use:
- ITR-3: For those with income from business or profession.
- ITR-4 (Sugam): For those opting for presumptive taxation under Section 44ADA, where annual earnings are under INR 50 lakhs, and you declare 50% of your income as profit.
Essential Registrations:
Permanent Account Number (PAN): Mandatory for all financial transactions and tax filings, serving as a unique identification number.
GST Registration: Essential if annual turnover exceeds INR 20 lakh (or INR 10 lakh for northeastern states). After registration, ensure that you file your GST returns regularly (monthly or quarterly), even if you have zero income in a given period.
Advance Tax:
As an influencer, you are responsible for paying advance tax if your total tax liability exceeds INR 10,000 in a financial year. Advance tax must be paid in 4 installments during the year: 4 installments:
- 15% by June 15
- 45% by September 15
- 75% by December 15
- 100% by March 15
Tax Audit Requirements
If the gross revenue of the influencer exceeds INR 1 crore in a financial year, they are required to get a tax audit .
If, however, they make less than 5% of their payments in cash, the tax audit limit goes up to INR 10 crores.
Tax Planning for Influencers in India: 14 Tips & Strategies
Tax planning for influencers in India is a crucial aspect of financial management. Here are key tax planning tips and strategies for influencers in India:
1. Understand Income Tax Obligations:
As an influencer, it is important to understand how your income is classified and taxed.
Most influencer earnings are classified under “Income from Business or Profession”, and taxed according to individual income tax slabs.
2. Maintain Separate Accounts:
We recommend maintaining separate bank accounts for personal and business expenses to streamline financial management.
This separation simplifies bookkeeping, aids in tracking income and expenses, and ensures clarity during tax filing.
3. Proper Documentation:
For effective tax planning, influencers must maintain proper documentation of all their financial activities. This includes:
- Invoices for payments received from brands and agencies.
- Receipts for business-related expenses (e.g., equipment, marketing costs, travel).
- TDS certificates (Form 16A) to claim tax deducted at source.
Organized records also provide proof in case of an audit by tax authorities.
4. Choice of the Tax Regime:
Influencers have the option to choose between the old tax regime (allows for deductions and exemptions) and the new tax regime (lower tax rates minus most deductions).
Choosing the right regime based on your total income and the deductions you can claim under the old regime.
5. Consult a Tax Professional:
Seeking assistance from trusted tax advisors from firms like PKC Management Consulting can make things easier.
Tax professionals can help identify the right tax-saving opportunities, ensure compliance with multiple requirements, and manage complex issues such as international income or capital gains.
6. Consider Presumptive Taxation (Section 44ADA):
For influencers whose annual gross receipts are less than INR 50 lakhs, the presumptive taxation scheme under Section 44ADA offers a simplified way to calculate taxes.
This allows them to declare 50% of their gross receipts as taxable income, and tax is paid only on that amount.
Plus, there is no need to maintain detailed books of accounts.
This option can be beneficial for influencers with lower business expenses. However, if your actual expenses exceed 50% of your income, regular taxation might be more beneficial.
7. International Income & Tax Optimization:
Influencers who earn income from international brands or platforms need to be aware of double taxation issues.
India has Double Taxation Avoidance Agreements (DTAA) with many countries, allowing influencers to avoid paying taxes twice on the same income.
For international income, make sure that the taxes deducted in the source country are claimed as a credit when filing your taxes in India.
8. Capital Gains Management:
If influencers invest in stocks or other assets, managing capital gains is essential.
Short-term capital gains are taxed at a higher rate than long-term gains, so planning the holding period of investments can reduce overall tax liability.
9. Maximize Deductions Available:
If you are opting for the old tax regime, make sure you are taking advantage of all the available exemptions and deductions.
These include deductions of investments in specified savings instruments, life and health insurance premiums, etc.
10. Claim Business-Related Expenses:
As a self-employed professional, influencers can claim deductions for business-related expenses, reducing their taxable income.
Common deductible expenses include:
- Equipment: Cameras, lighting, and computers used for content creation.
- Software & Subscriptions: Editing tools, design software, and paid apps.
- Office Rent: Renting a studio or workspace.
- Travel & Lodging: Travel expenses for attending events, shoots, or collaborations.
11. GST Planning for Influencers:
Influencers must register for Goods and Services Tax (GST) if their annual turnover exceeds the stated limit.
Registered influencers can claim input tax credit on business-related purchases, like equipment or software used in content creation, reducing their overall GST liability.
However, it is not available on blocked credits, i.e. tax credits that are not allowed to be claimed under GST for items such as motor vehicles for personal use, employee benefits, and construction services.
12. Utilize TDS Credits:
Brands often deduct Tax Deducted at Source (TDS) when paying influencers for services.
Influencers must keep track of these deductions and claim TDS credits while filing taxes. If the TDS deducted exceeds your total tax liability, you can claim a refund.
In order to claim TDS, ITR filing is mandatory.
13. Risk Management:
Tax compliance carries risks such as audits or penalties for non-compliance.
Influencers should stay informed about changes in tax laws and maintain accurate records to mitigate these risks effectively.
14. Quarterly Review:
Regularly reviewing financial statements and tax obligations quarterly can help influencers stay on top of their finances.
This practice allows them to adjust strategies as necessary and prepare adequately for annual filings.
Frequently Asked Questions
- How are influencers taxed in India?
Influencers are taxed as self-employed individuals, required to file an annual Income Tax Return detailing all income from sources like sponsored posts and endorsements. They must adhere to the applicable income tax slabs based on their total earnings.
- What is the TDS rate for influencers?
The TDS rate for influencers is 10% on benefits or perquisites received in cash or kind that exceed INR20,000 in a financial year, as mandated by Section 194R of the Income Tax Act. This includes gifts and promotional items received from brands.
- Do influencers need GST?
Yes, influencers must register for Goods and Services Tax (GST) if their annual turnover exceeds ₹20 lakh (or ₹10 lakh in special category states). GST is typically charged at a rate of 18% on their services.
- What forms do social media influencers need to file for taxes?
Influencers typically use ITR-3 for reporting income from business or profession, while those opting for the presumptive taxation scheme can use ITR-4.
- Are there penalties for not filing taxes as an influencer?
Yes, failing to file taxes can result in penalties, interest on unpaid taxes, and potential legal repercussions. The Income Tax Department has been actively cracking down on tax evasion among influencers.
