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Not all Minor income is subject to the Clubbing Provision
Youtube, Instagram, Facebook, Snapchat, LinkedIn etc have become an important part of life now. People are spending more & more time on social media now. It is not only a way to stay connected with friends, families & market but also a way to remain updated about current affairs, changing trends, and new products. Statistics convey that more than 50% of the global populations are dependent on this social media for shopping, entertainment, foods or health related matters. Even businesses have found social media as one of the most powerful ways of reaching out to the target audience. The future of marketing is now revolving all around social media.
The dependability on social media has resulted in the emergence of a new set of professionals, referred to as social media influencers, who can help the brands to promote products and services. All such influencers generate a high number of followers with their regular act or post over the preferred platforms such as Instagram, YouTube, facebook, linkedin, Snapchat, etc. These social media professionals are often recognized as Content writers, YouTubers, vloggers, content creators or food bloggers, etc. This new age breed of professionals is limited to not adults alone but even minors have their own independent channels & portals. Various social media is giving an option to monetize its content which if it opted, gets commercialized with advertisement spots. Earnings from above social media platforms largely depend on the number of views along with factors such as the number of subscribers, traffic source, contents, etc. Influencers have earnings from sponsorship, Google AdSense, Marketing Agencies, etc. Most of the professionals act as a freelancer or work from home as per their comfort & convenience. The question arises as to its taxation. Let us know about it:
Income Tax Implication:
- Social influencers are a class of entrepreneurs or freelancers. Hence, their income can be taxed as “Business Income” depending on the time and efforts placed on a day-to-day basis. If the time spent is relatively less or activity is undertaken not from a business perspective then the income could qualify as “Income from Other Source”.
- In either case, the income is chargeable to tax according to the applicable slab rates in force in case of individual person.
- Any expenses for earning such income can be deducted to arrive at the net taxable income. Expenses for which deduction can be claimed may be towards cameras, microphones, internet, software, rent, conveyance, travel or transportation expenses, etc. All such expenses will be deductible only if they are incurred wholly & exclusively for the purpose of earning the income. Expenditure of personal nature may not be eligible for deduction.
- Such Individual influencers can opt for presumptive schemes of taxation as provided under section 44AD or 44ADA of the Income Tax Act-1961.
- a)Presumptive scheme of Taxation for Business Income [Section 44AD]
Under presumptive scheme of taxation, taxpayer whose receipt is in the nature of business, can offer income @ 8% (6% for the turnover in digital mode) of the Gross receipts as income if the total turnover / receipts is not exceeding Rs. 2 Cr. By opting for a presumptive scheme of taxation, the influencer will be relieved from the requirements of maintaining the books of accounts.
- Influencers whose gross receipts exceed Rs. 2 crore in a financial year are required to maintain the books of accounts and are also required to get them audited. The requirements of audit will not be there for receipts up to Rs. 10 Cr if not more than 5% of all payments as well as 5% of all receipts in a financial year are made in cash.
- If the turnover exceeds Rs. 10 Cr or if the turnover is less than Rs. 2 Cr but the income offered for taxation is less than 8% or 6% then the tax audit of the influencer would be mandatory.
5. Presumptive scheme of Taxation for Professional Income [Section 44ADA]:
Under presumptive scheme of taxation, taxpayers whose receipt is in the nature of professional receipt are required to offer 50% of the Gross receipts as income if the total turnover / receipts is not exceeding Rs. 50 Lakh. If the gross receipt exceeds Rs. 50 Lakh or income offered for taxation is less than 50% then the tax audit of the influencer would be mandatory.
Taxation of Minor’s Income:
- a)The income of minors is ordinarily taxed in the hands of parents. However, the clubbing provision is not applicable for income earned out of own manual work or out of talents or specialized knowledge & experience.
- b)In the case of minor influencers, it can be viewed as income accruing due to their own skills and hence it will not be subject to the clubbing provision and will be taxable in the hands of the Minor only.
- c)As a result, minors would get the separate benefit of the slab rates in this regard.
Applicability of GST on Influencer:
- Under the GST law, services of influencers can be categorized as Online Information and Database Access or Retrieval Services (OIDAR). These may be considered as services that use information technology to distribute data through the internet or by means of an electronic network.
- If any influencer’s turnover exceeds Rs.20 lakh in a financial year (Rs.10 lakh if they are based in a special category state) then they are required to get themselves registered under the GST law.
- GST is chargeable @ 18% on services provided by GST-registered social media influencers and bloggers. Depending on whether the supply is intrastate or interstate, 9% each of Central Tax (CGST) and State Tax (SGST) is imposed, or18% of Integrated Tax (IGST).
- As far as export of services is concerned, the GST rate is 0%. Social media influencers who want to export their services have two options. They can either export services by providing a Letter of Undertaking (LUT) or pay IGST and later claim it as a refund. The supplies are zero-rated in advertisements placed on platforms like Google Inc. and Google AdSense, which is widely used by influencers as the recipient of these services is located outside of India.
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CA Naresh Jakhotia
Partner – M/s. SSRPN & Co.
10, Laxmi Vyankatesh Apartment
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