Tax on Social Media Influencers

Recently social media usage was growing rapidly, and it has transformed the way people communicate, consume content and engage with brands. India is one of the largest and fast-growing digital markets in the world. Social media platforms like Facebook, Instagram, YouTube, Twitter, Snapchat and TikTok (until its ban) have become an integral part of daily life.

This document covers

Types of Social Media
Streams of Income from Social Media
Taxability of Various types of Income

1. Types of Social Media

There are various types of social media across the world

Social Networking Platforms: These platforms focus on connecting people, building communities and enabling communication through messages, comments and posts

Example:Facebook, Linkedin

Photo sharing platforms: These platforms allow the users to upload, share photos and videos

Example: Instagram, Pinterest

Video sharing platforms: These platforms allow users to focus on long and short video contents

Example: Youtube, Tiktok, Instagram

Microblogging Platforms: These platforms allow users to share short updates, thoughts and quick information

Example: X(twitter), Threads

Messaging and communication apps: These platforms allow users for direct messaging, group chats, sharing media, and coordination.

Example: Whatsapp, Telegram, Messenger, Instagram

Discussion Forums and Community Platforms: These platforms facilitate question-answer discussions, debates, and community problem-solving.

Example: Reddit, Quora

Blogging and Publishing Platforms: These platforms help users create and share long-form written content.

Example: Wordpress, Blogger

2. Streams of Income from Social Media

With the rise of social media in recent years, a new and impactful profession has emerged i.e., "Social Media Influencer". The influencers can earn money through various income streams as below

Brand Collaborations & Sponsored Posts: Brands pay influencers or content creators to promote products or services through posts, videos, or stories.
Affiliate Marketing: Influencers earn a commission when their followers purchase products using a special link or discount coupon by them in their posts.
Platform Ad Revenue (Monetization): Platform ad revenue commonly called monetization, is one of the major income streams for influencers. When a creator uploads the post (Short video, photos, long videos), the platform places ads before, during, or around that content. The revenue generated from these ads is shared between the platform and the creator. Creators earn money based on factors such as:
- Number of views
- Watch time
- Audience demographics
- Ad type and placement
- Engagement rate
Freebies, Gifts & Perquisites (Barter): Social media influencers receive free products, gifts, sponsored trips, or services from brands in exchange for promotion. These benefits, even when not paid in cash, are treated as perquisites under the Income-tax Act. TDS needs to be deducted by deductors and its forms part of Income tax.
Sale of goods or services: Some of the influencers launch their own business and it is one of the major sources of revenue.
Paid Subscriptions and Membership: Some influencers ask their followers to pay to get access to exclusive content.
Live Stream Monetization: Influencers earn money during live sessions through virtual gifts or paid interactions. Followers pay in real money to send digital gifts like YouTube Super Chat & Super Stickers, Instagram Badges etc

3. Taxability of Various types of Income

S.No	Stream of Income	Income Tax	TDS	GST
1	Brand Collaborations & Sponsored Posts	Taxable as Business/Profession	TDS @ 10% u/s 194J or 1% or 2% u/s 194C needs to be deducted by person who is making payments	GST @ 18% needs to be paid if the threshold exceeds Rs 20 lakhs
2	Affiliate Marketing	Taxable as Business/Profession	TDS @ 5% u/s 194H needs to be deducted by person who is making payments	GST 18% needs to be paid if the threshold exceeds Rs 20 lakhs
3	Platform Ad Revenue	Taxable as Business/Profession	No TDS generally deducted by platforms unless those are Indian platforms	GST is applicable. If the revenue is from foreign entities, these will be treated as zero rated sales
4	Freebies, Gifts & Perquisites (Barter)	Taxable as business income and freebies received are taxable at Fair market value of the products received	TDS @ 10% u/s 194R to be deducted by brand	GST 18% needs to be paid if the threshold exceeds Rs 20 lakhs
5	Sale of goods or services	Taxable as Business/Profession	TDS is not applicable Note: TDS might be applicable in very rare cases like some entities are purchasing quantities in bulk or when influencing is providing services to B2B entities	GST 18% needs to be paid if the threshold exceeds Rs 20 lakhs for goods or services and Rs 40 lakhs for goods in some states
6	Paid Subscriptions and Membership	Taxable as Business/Profession	TDS is not applicable	GST 18% needs to be paid if the threshold exceeds Rs 20 lakhs
7	Live Stream Monetization	Taxable as Business/Profession	TDS is not applicable	GST 18% needs to be paid if the threshold exceeds Rs 20 lakhs

Notes

Influencers can claim expenses like editing expenses, shoot expenses, internet, rent, salaries, photography/videography etc
The influencers are required to file ITR 3/ITR 4
CBDT has introduced business code 16021-Social Media Influencers in ITR 3 and ITR 4 and the influencers required to select this code while filing.
The influencers can opt for presumptive taxation u/s 44ADA or 44AD also