Legislative reforms surrounding Influencer Marketing are gradually evolving in India. The Indian influencer marketing industry is valued at Rs. 900 crore and is expected to grow at a CAGR of 25 per cent to reach Rs 2,200 crore by 2025.
The social media Influencer marketing business is a rapidly evolving area. Influencers are known to make and break trends on social media platforms.
In this blog post, we will delve into the TDS regulations affecting social media influencers, exploring what it means for their income, and providing valuable insights on compliance.
Tax Deducted at Source (TDS) is a system through which the government ensures that taxes are collected at the source of income. For social media influencers, this means that a certain percentage of their income may be deducted by the platform before it reaches them. This deduction is then remitted to the government on the influencer’s behalf.
Applicability to Social Media Influencers:
The TDS rules for social media influencers come into play when their income reaches a certain threshold. In the Finance Act, changes for TDS rules are introduced, expanding the scope to cover a broader range of digital transactions, including income earned through social media platforms.
TDS Rules for Social Media Influencers
From July 1, 2022, Social Media Influencers will have to deduct TDS @10% on freebies they receive from businesses for promotion, under Section 194R in the Income-tax Act, 1961.
Many companies have tapped into the potential of social media influencers to market their products and services in a much cheaper and faster way.
Key Points for Social Media Influencers:
Threshold Limit: Social media influencers need to be aware of the threshold limit beyond which TDS is applicable. It’s essential to keep track of their earnings and ensure compliance when their income surpasses the specified limit.
TDS Deduction Rates: Current TDS rate is 10%. The TDS rates for social media influencers can vary based on their residential status, type of income, and applicable tax treaties. Understanding these rates is crucial to accurately estimate the amount that will be deducted from their earnings.
Form Submission: Influencers may be required to submit certain forms and documents to declare their tax status and avail any relief provided by tax treaties. Failing to do so may result in higher TDS deductions.
Tax Planning: Social media influencers can explore legal avenues for tax planning to optimize their earnings. Utilizing deductions and exemptions available under the tax laws can help minimize the impact of TDS on their overall income.
Professional Advice: Given the complexity of tax regulations, influencers are advised to seek professional advice. Consulting with a tax expert can provide personalized insights into their specific situation, ensuring they stay compliant with the latest TDS rules.
It is also very important for the Influencers to safeguard their legal rights before signing Influencer Marketing Agreement. In the ever-evolving landscape of social media influencing, staying informed about financial regulations is key to long-term success.
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