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Tax On Social Media Influencers: Ultimate Guide 2021 (Updated)

Do social media influencers have to pay taxes? What tax forms do influencers get?

Our topic of discussion today is a little different than YouTube. We are going to discuss and understand the tax on social media influencers. For sponsored content, celebrities and influencers are compensated. The payments may be made under the terms of a contract, which might be one-time or recurring for many articles, posts, stories, etc. So, let us begin to understand the tax on social media influencers.

Social Media is a huge part of our lives, and so does Social Media Influencers. They are called influencers because they influence our purchasing decisions greatly. I say so because people have established the practice of reading “reviews” of their favorite influencers before making any purchase selections in the recent past.

Working with social media influencers has proven to help brands sell their products and services to a larger audience. Influencers can use social media platforms like YouTube, Instagram, Facebook, Twitter, and others to promote products and services in fashion, cosmetics, lifestyle, travel and tourism, and more.

Implication Of Tax On Social Media Influencers

Tax on social media influencers
TAX

Source Of Income

  • Earnings from the YPP program.
  • Endorsements.
  • Income from Affiliate Marketing.
  • Display Advertising
  • Becoming a Brand Ambassador
  • Promoting Self’s Line of Products or Services.
  • Sponsored Content or Blogs, posts, etc

How Is The Income Taxed?

tax on social media influencers
Calculations

For Individual Influencers

Influencers’ earnings are taxed under the category of “Profits and Gains from Business and Profession.” The profits of individual influencers are taxed at the prevailing slab rates. Influencers who make more than Rs.1 crore in total gross revenue will have their records audited in a financial year. The limit has been raised to Rs. 10 crores, if not more than 5% of all payments and receipts in that financial year are made in cash.

Income Through YouTube And Sponsered Content

Income gained from YouTube or sponsored partnerships are deemed “Income from the Profession,” and as a result, tax is applied according to the slab rates.

In such circumstances, Income Tax Is Levied under Two Schemes

Income From Busines And Profession

  • An aggregate of gross receipts is computed during the fiscal year, and then all costs are adjusted against the gross receipts. However, only those authorized costs under Section 37 of the Act are deducted from gross receipts.
  • Following the adjustment (Gross profit – Expenses*), the difference is the Net profit, calculated on tax.
  • For exclusions, as provided by the Act, deductions as provided by Sections 80C, 80D, and other sections of the Act, and disallowances as provided by Section 37 of the Act, all other provisions of the Act apply. When gross revenues in an F.Y. exceed 1 crore, a taxpayer must acquire his books of accounts, according to the rules of the Income Tax Act. If the taxable income is less than 50% of the gross receipts, the business’s books must be audited.

What Are The Expenses Allowed Under the Act-On Tax On Social Media Influencers? (Under Section 37 Of The Act)

  • Depreciation- Types of equipment used while vlogging like cameras, laptops used for the purpose of nature of business.
  • Expenses like traveling, stay during the business, internet bill, electricity bill. Also, costs incurred during promotion and marketing.

Conclusion

This was all about the tax on social media influencers. We hope it was informative for you and it helped you understand the calculations of the taxation.

Frequently Asked Questions

Q.1 Do social media influencers have to pay taxes?

Answer: Yes, social media influencers have to pay taxes on their earnings. If they pursue their passion into a full-time job and earn more than $600, they are liable to pay taxes on the income gained.

Q.2 Why do influencers pay taxes?

Answer: According to the law, they earn money, and any income above a specific limit is taxed according to the slab rates.

Q.3 Is social media influencer self employed?

Since most of the earnings are through sponsorship, social media influencers are classified as self-employed individuals or sole proprietors engaged in trade or business for taxable purposes.

Q.4 What can YouTubers write off on their taxes? 

Expenses like camera equipment expenses like filming, repairing the equipment,  travel expenses like hotel stay, internet costs, electricity costs, food expenses while on work trips while recording Y.T. videos.