TAXATION OF INFLUENCERS AND CONTENT CREATORS: THE NEW FRONTIER

INTRODUCTION

In recent years, the rise of social media has given birth to a new and powerful profession: AN INFLUENCER

What began as individuals sharing their personal lives, opinions, and talents online has now evolved into a full-fledged marketing industry. Influencers are people with a dedicated following on social media platforms like Instagram and YouTube who partner with brands to promote products and services in a relatable & authentic way. This form of marketing, known as influencer marketing, has gained immense attraction due to its ability to reach niche audiences and drive engagement. 

The Influencers earn money through multiple revenue streams like:

• Sponsored posts

• Brand collaborations

• Barter deals (free products/services in exchange for promotion)

• Ad revenue (YouTube, Instagram, etc.)

• Affiliate marketing

• Merchandise sales or digital products

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Income in this profession can vary widely - from a few thousand rupees per post for micro-influencers to several lakhs or even crores annually for those with millions of followers and strong brand partnerships. As brands increasingly shift budgets from traditional advertising to digital campaigns, influencer marketing continues to gain attention as a dynamic, results-driven promotional strategy.  

As the digital economy grows, the income generated by social media influencers is receiving increasing attention from tax authorities. It is essential for influencers to be aware of their tax obligations under both the Income Tax Act and the GST Act.

TAXABILITY OF THE INCOME

All income earned by influencers, regardless of the source, is taxable under the Income Tax Act, 1961. Furthermore, the supply of services by influencers attracts GST. As a result, influencers are liable to pay both income tax on their earnings and GST on the services they render.

A) TAXABILITY AS PER INCOME TAX ACT, 1961

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Understanding the appropriate Head of Income for reporting earnings:

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Profits & Gains from Business & Profession

Influencers can opt to pay tax on their income under Section 44ADA of the Income Tax Act. This section allows professionals with a turnover of less than Rs. 75,00,000 to file their taxes using the presumptive taxation scheme. However, if the cash receipts and payments are more than 5% of their total receipts and payments, the turnover limit for eligibility is reduced to Rs. 50,00,000.

Under this scheme, influencers are not required to maintain books of accounts. Instead, 50% of their total turnover is considered as profit, and income tax is then calculated based on the applicable slab rates.

If the turnover exceeds Rs. 75,00,000, the influencer must maintain proper books of accounts, and tax will be levied on the actual profit as per the slab rates.

Income from Other Sources

If an individual earns additional income from influencer activities as a hobby or a part time it should be reported under the head “Income from Other Sources”. This income is taxed according to the applicable income tax slab rates for that individual. Furthermore, any expenses incurred exclusively for generating this income can be claimed as deductions, and tax will be payable only on the net income after deducting such expenses. 

Now that we have understood the tax implications, let's delve into the applicability of Tax Deducted at Source.

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TAX DEDUCTED AT SOURCE 

As per the provisions of the Income Tax Act, influencers receive payments for their professional services after deduction of TDS. Typically, TDS is deducted under the recently introduced Section194R or commonly known Section 194J or 194C

If an influencer is engaged because of their specific expertise, goodwill, personal brand, or public image, it indicates that they are being hired in a professional capacity. In such cases, the payment qualifies as professional fees, and hence, TDS under Section 194J at the rate of 10% should be deducted.

Additionally, if a company engages an agency for influencer related activities such as promotion, marketing, or advertising, the arrangement constitutes a contractual agreement between the company and the agency. Accordingly, TDS should be deducted at 2% under Section 194C. Further, when the agency hires influencers based on their professional expertise, TDS under Section 194J at 10% becomes applicable on payments made to the influencers.

These two sections are commonly known and widely applied. However, Section 194R has been introduced recently and plays an important role in this context.

Section 194R mandates that any person providing a benefit or perquisite (in cash or kind) to a resident in the course of business or profession must deduct TDS at 10%, provided the total value of consideration exceeds Rs. 20,000 in a financial year. It applies to both monetary and non-monetary benefits, such as gifts, freebies, or promotional items. TDS must be deducted before providing the benefit. In cases where the benefit is wholly in kind or partly in cash and kind, the provider must ensure the TDS is paid. This section does not apply if the provider's turnover was below Rs. 1 crore (for business) or Rs. 50 lakhs (for profession) in the previous financial year. 

Let’s take some examples to understand these sections in detail:

1. A smartphone company gives a free mobile phone worth Rs. 1,00,000 to an influencer for promotional purposes. (in exchange for reviewing and posting it online). 

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• Since the value of the benefit provided exceeds ₹20,000 in a financial year, Section 194R of the Income Tax Act gets triggered and TDS @ 10% needs to be deducted before providing the benefit.

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2. A smartphone company provides a mobile phone worth ₹1,00,000 to an influencer for promotional purposes (in exchange for a review and online posts), with the condition that the phone must be returned after the promotion. 

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• In this case, Section 194J is applicable, and the company is required to deduct TDS at 10% on the value of the service provided.

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3. If a smartphone company engages an agency for promotional activities and instructs them to hire influencers, a contractual relationship is established between the company and the agency. 

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• Here, TDS should be deducted at 2% under Section 194C.

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Hence, depending on the nature of the arrangement, TDS will be deducted under the relevant section as outlined above. 

Having examined the applicability of tax provisions under the Income Tax Act, we shall now proceed to explore the taxability under the Goods and Services Tax (GST) Act.

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B) TAXABILITY AS PER GST ACT

The services provided by social media influencers are classified as Supply of Services under the GST Act and are subject to GST at the rate of 18%.

GST registration requirements for influencers are the same as for other service providers. If an individual’s annual turnover exceeds Rs. 20,00,000 (or Rs. 10,00,000 in special category states), they are required to obtain GST registration.

There are two possible scenarios:

1. Influencer Registered under the GST Act:

When an influencer is registered under the GST Act, they are required to charge GST on the services they render. This means that the influencer must raise a tax invoice including the applicable GST—typically at the rate of 18%—and collect the tax amount from the recipient of the service. 

The influencer is then responsible for depositing the collected GST with the government and filing appropriate GST returns, just like any other registered service provider.

2. Influencer Not Registered under the GST Act:

If the influencer is not registered under the GST Act—generally because their annual turnover is below the prescribed threshold (Rs. 20 lakhs or Rs. 10 lakhs in special category states)—they are not permitted to charge GST. However, in such cases, the liability to pay GST shifts to the service recipient, typically a company or business entity, under the Reverse Charge Mechanism (RCM). 

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Under RCM, the company availing the influencer’s services must self-assess and pay the applicable GST directly to the government. Additionally, the company may be eligible to claim input tax credit (ITC) on the GST paid, subject to prevailing conditions under the GST law.

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CONCLUSION:

In conclusion, the taxation of influencers and content creators marks a significant shift in how emerging digital professions are regulated. As the creator economy continues to grow rapidly, tax authorities have recognized the need to bring these earnings within the formal tax framework. Whether it's through income tax under various heads or TDS provisions like Sections 194J, 194C and 194R, or compliance with GST laws, influencers must now navigate a more structured and transparent tax landscape. It is essential for content creators to stay informed, maintain proper documentation, and seek professional guidance to ensure full compliance and avoid potential legal complications. As this new frontier continues to evolve, so will the tax laws governing it—making awareness and adaptability key to sustainable success in the digital age.

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Authors:

Vishal Kothari

Partner | LinkedIn Profile |

Nitesh Jha

Manager | LinkedIn Profile |

Yashvi Mehta

Senior Consultant | LinkedIn Profile |

Mahek Shah

Associate Consultant | LinkedIn Profile |

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Email: blogs@bilimoriamehta.com

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