Social media has become very important and necessary for us. From communication to entertainment and shopping, it is our one-stop solution for various needs. The number of people using social media has increased rapidly in the last 10 years. Already this number is 57% of the global population, this number is likely to increase further. Therefore, influencer marketing has become an important aspect of a brand’s marketing strategy and is seen as an efficient way to reach the target audience and increase awareness. Other things, including sponsorship and ad money, can be attractive to social media influencers.
Tax on Social Media Influencers and Its Calculations
Influencer income is generally treated as company earnings that are subject to standard income tax. But those people who are subject to final tax or are out of taxation under the existing rules are excluded from this purview. YouTube Partner Program, Sponsored Social and Blog Posts, Display Advertising, Becoming a Brand Representative or Ambassador, Affiliate Marketing, Co-creating Project Lines, Promoting Your Own Products, Photo, and Video Sales, Digital Courses, Subscriptions, E-Books Any amount received from, podcasts, and weblogs, etc., whether in monetary form or in any other form, are all business income which will attract regular income tax.
Influencers’ earnings are subject to income tax under the head ‘Profits and gains from business and profession’. Earnings of individual influencers are taxed at the existing slab rates. A tax audit is conducted on the books of accounts of influencers earning more than Rs 1 crore in a financial year. If not more than 5% of all payments, as well as 5% of all receipts, are in cash in that financial year, the maximum earning scope for audit is raised to Rs 10 crore. Tax Deduction at Source (TDS) under the Income Tax Act may be applicable on payments made to Influencers. The TDS rate will be determined by the nature of the service provided or the type of transaction done (TaxSlayer).
What is the rule of GST?
The services of YouTubers, Influencers, and bloggers are classified as Online Information and Database Access or Retrieval Services (OIDAR) under the Goods and Services Tax (GST) Act. In simple words, these services are considered to be services that use information technology to distribute data through the Internet or through electronic networks. If the turnover of an influencer is more than Rs 20 lakh in a financial year then they will have to register under the GST law. For influencers who live in a special category state, the turnover limit is Rs 10 lakh. GST at the rate of 18% is levied on the services provided by GST-registered Social Media Influencers and Bloggers.
What are the rules in the case of export of service?
Central tax (CGST) and state tax (SGST) are levied at the rate of 9-9% depending on whether the supply is intrastate or interstate. Or we can say that Integrated Tax (IGST) is levied at 18%. Talking about the export of services, the GST rate is 0%. Social Media Influencers who want to export their services have two options. They can either export the services by providing a Letter of Undertaking (LUT) or pay IGST and claim it as a refund later. Google Inc. And the supply of ads placed on platforms like Google AdSense is zero-rated. These platforms are widely used by Influencers as the recipients of these services are located outside India.
You can take advantage of these deductions
You can deduct business expenses from your income to reduce your taxable income, which will reduce your tax payments. Possible examples of what can be deducted as a Social Media Influencer include filming expenses such as cameras, microphones and other equipment; subscription and software licensing fees; Internet and communication expenses; home office expenses such as rent and utilities; Office Supplies; Business expenses like travel or transportation expenses etc. are included. Your expenses are tax-deductible only if they are ordinary and necessary for your employment as an Influencer.