Earning from social media? Know how much tax influencers need to pay

As the deadline for filing income tax returns ends today, tax experts suggest social media influencers accurately declare their earnings to the tax department. Recent reports have revealed that the income-tax (IT) department has been employing artificial intelligence tools to track individuals who may be filing false returns, reporting lower or negligible income.

The IT department conducted raids on the residences and offices of 13 prominent YouTubers and content creators in Kerala, questioning them about the apparent disparity between their lavish social media lifestyles and the low income reported in their tax returns.

Social media revenue reporting

"Any income generated from social media, regardless of the amount, is required to be declared to the tax authorities. Additionally, if the annual income from foreign countries exceeds Rs 2.5 lakh, filing income tax returns becomes mandatory," said Arpit Suri, CA and personal finance expert.

"Certain criteria may necessitate filing returns even if the income falls below the threshold of Rs 2.5 lakh. These conditions include depositing over Rs 1 crore in a 'Current' bank account, depositing more than Rs 50 lakh in a 'Savings' bank account, spending over Rs 2 lakh on foreign travel, incurring electricity expenses exceeding Rs 1 lakh, having TDS or TCS deductions of more than Rs 25,000 annually, business turnover surpassing Rs 60 lakh, or professional income exceeding Rs 10 lakh," Suri added.

The types of income taxed by the IT department for social media influencers include remittance, earnings from promotions, subscription and workshop fees, merchandise commissions, and gifts and review products received in PR packages.

Starting in July 2022, the tax department implemented a 10 per cent Tax Deducted at Source (TDS) on gifts worth Rs 25,000 or more annually. 

Social media income requires tax payment regardless of your occupation | Image credit: Shutterstock

Income Categories

All income should be classified under two major categories.

1. Business income for those self-employed or in a partnership firm
2. Income from other sources for salaried individuals pursuing social media part-time

Income from YouTube channel ads, website sales, and subscription fees generally fall under business income.

Social media income requires tax payment regardless of your occupation | Image credit: Shutterstock

"When filing tax returns, influencers can declare the expenses incurred in creating content. Those declaring their social media income under business income can claim expenses like hiring makeup artists or PR teams," said Amit Gupta, MD, SAG Infotech. "However, if income is declared under other sources, the options for claiming expenses are limited. Proper record-keeping of receipts is crucial in this process," he added.

Influencers can also claim income tax exemptions for payments related to home loans, life and health insurance premiums, tax-saving fixed deposits, mutual fund investments, conveyance, and other eligible expenses.

Tax experts suggest social media influencers file their tax returns accurately and on time to avoid potential legal problems.