Taxability of income earned by youtubers, instagramers and other influencers in India and How to show it in Income tax return

written by Income tax Expert | May 28, 2021

Recently we had seen that Youtube came up with it’s new policy wherein it had mentioned that it will with hold tax for non US creators and same could go upto 30% and this was a shock for many creators in India as any which ways they were not getting much income from Youtube and now this.

However, if we go through the policy we can see that it won’t affect many Indian creators whose majority audience is from India as it talks about withholding tax on amount earned from USA.

But, now let’s talk about taxability of such income in India and other brand advertisement or branch placement income earned by Youtubers and other social media influencers or bloggers on various platform like instagram etc.

If we look at various sources of Income of such people, it is either from Adsense or income earned by advertising a brand i.e. brand placement.

With a boom in digital media, companies are spending huge amount on digital marketing of their product and which is in turn increasing revenue of such influencers and bloggers.

If we listen to them we come to know that they don’t earn much from Adsense but major income is from brand integration or brand placement.

All influencers are not tax experts and hence they don’t know how they will pay tax on their income or how will their income be treated under Income tax act.

Also, one more confusion is whether they have to pay tax on such income. The answer is yes if their income exceeds a threshold limit.

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Before deciding on where to tax the income many people have the question as to whether they have to register their business or form company to earn such income?

The answer would be “NO”. Under income tax if a person earns income in his own name he will be considered as “sole proprietor” and he need not register separately to pay tax on such income.

Now, let’s discuss, how to tax such income earned by youtubers and other influencers?

If a person is earning a good amount from this thing and is even incurring expenses for the same he needs to tax it under income from business and profession head under Income tax i.e. PGBP.

The most common suggestion which is provided to them is to take benefit of presumptive taxation under Income tax act and show a certain percentage of their turnover as income and pay tax on them.

Under presumptive taxation one is not required to maintain books of accounts and as mentioned above there are many young creators who are not aware of majority of rules of book keeping using presumptive taxation is the best option.

If you show this activity as a business you can show as low as 6% of your turnover as income under section 44AD and pay tax on same and if you show it as professional income you have to show minimum profit of 50% of your turnover under section 44ADA.

Do remember that this a minimum profit which needs to be a shown and we all know that majority of creators earn way more than this minimum percentage especially those who are working on their own and per the Income tax provision one needs to show minimum profit or actual profit whichever is higher.

If you have read other articles or post, you might have seen that many people are considering this as profession u/s 44ADA of Income tax act and accordingly suggesting you to show it as professional income and show minimum 50% of turnover as income.

If we look at the definition of professional under Income tax act for section 44ADA, we can find it under section 44AA which is as under:

“Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette shall keep and maintain such books of account and other documents as may enable the Assessing Officer to compute his total income in accordance with the provisions of this Act.”

Now the other profession notified by board is that of “film artist” and per rule 6F film artist means:

“(i) an actor;
(ii) a cameraman;
(iii) a director, including an assistant director;
(iv) a music director, including an assistant music director;
(v) an art director, including an assistant art director;
(vi) a dance director, including an assistant dance director;
(vii) an editor;
(viii) a singer;
(ix) a lyricist;
(x) a story writer;
(xi) a screen-play writer;
(xii) a dialogue writer; and
(xiii) a dress designer.”

Now people say that a Youtuber also does similar activity and therefore he will be considered as film artist and hence needs to be taxed as professional under section 44ADA.

It is worthwhile to mention here that the work of youtuber or other influencer who earn from Adsense or brand placement is not similar to that of film artist and there are various reason for same:

1. They are not working in films and both are extremely different but if we think this is a modernised version of films then also they cannot be taxed as professional because,

2. An artist is taxed as professional if he performs an art for other person and in turn get’s fees but in this case influencers are creating their own work and in turn getting money from Adsense for Ads on their videos and same goes with brand placement where they get money for placing brands in their video or instagram post and hence the artist here are not paid for their skills.

We can understand that here the artist are doing a deal with other brand as a producer and not as an actor and hence their income needs to be taxed as business and not profession.

If they were earning any fees for acting then that might be considered as professional income but as far as this income is concerned it should be considered as business income.

Accordingly, if the influencer or youtuber wishes to take benefit of presumptive taxation he/ she can file ITR 4 and show a percentage of his total receipt as income and pay tax accordingly subject to the turnover limit mentioned in the Income tax act.

If you need any assistance for filing of ITR you can book filing of ITR with experts for booking CLICK HERE.

There is one more question regarding this but it is with regard to GST and whether influencers are required to take GST registration or not. In brief the answer is Yes and you can read this for more information and better understanding which is on the similar footing: https://www.taxontips.com/gst-registration-for-freelancers-in-india/

 

This article is just for information purpose and are personal views of the author. It is always advisable to get consultation from a professional for practical execution. If you need assistance you can book consultation with our experts at BOOK CONSULTATION and also subscribe to our newsletter for latest weekly updates.