Social media has been abuzz with the news of Influencers to pay tax on all the free products they get for promotional purpose. Let’s take a deeper look and understand how this will work and help the brand, targeted customers, and the influencers.
Use of social media has skyrocketed over the years has also lead to a risen the army of influencers. And it’s not a surprise that brands want to leverage influencers by giving them free products, services or money in exchange of a review.
Influencers payout depends on the size of their followers and how much traction they generate from their post, story or video which leads to sales for the brand. Influencers get to keep the products that they use for promotion purpose. Be it clothes, skin care, home décor or a free travel ticket, they get all kinds of perks. Finally the Indian Tax department has decided to put a break on this.
The Tax Implication
The Indian IT department has taken steps to control the perks that influencers enjoy. Also, the provision was included to widen the tax base. The law was introduced in the Financial Budget of 22-23 and will be implemented from 1st of July 2022.
The act requires Tax Deduction at Source (TDS) at the rate of 10% for any benefits or prerequisite provided to influencers who receive any product like beauty products, car, outfits etc and retain the same. However, if the influencer returns the product, the TDS will not be implemented under section 194R. The deduction is not required to be made if the Income or benefits don’t exceed Rs. 20,000/- in a year.
Sale discounts, cash discounts or rebates will not be subject to Tax.
How does it help improve the influencer and target consumers relation?
 Individuals place a lot of trust in the influencers they follow and make purchase decisions based on their recommendations. But the consistency in the influencer recommendation is what matters. One day you will see them promoting a XYZ brand of face cream and the very next day they will be talking about how they love the new face cream by ABC brand. There is no way one can vouch for the accountability of these influencers. You cannot really tell how well he/she has researched the product before recommending it to their viewers. The question that arises here is, how genuine the review is and has the influencer really tried the products before recommending it?
Again, being an influencer doesn’t require any qualification. Any and everyone with a camera in hand can be an influencer. This again raises the same question about how well the influencer knows the brand or the product before promoting it. For e.g., an influencer has nothing to do with finance but is recommending a financial product to his/her viewers. These reviews are most of the time hearsay or swaggering in nature.
Influencers now paying Tax on the products will make sure that they work with brands they really want to and not take up anything that is offered to them.
Conclusion
International laws for influencer marketing have been stringent from start. India has finally started taking the booming influencer market seriously by adopting steps to make sure that the work done as an influencer, or a promoter is done with utmost diligence.
With the new tax law in place, we can now expect some genuineness in the promotions as the influencer him/herself will be screening on which brand to work with and which to skip.
Read : 5 cash transaction limits on investments to avoid Income Tax notice
19 replies on “Influencers to Pay a Tax? How does it make the market more reliable?”
This was a new information to me and I am glad to read that India gov. has taken this decision. it will create a genuine environment and help customers to see more real products in market. nowadays, with no barrier, we can not decide what is real and what is fake, due to large number of influencer promotions.
wow..thats wonderful. You are right, becoming an influencer is not that hard if someone is camera friendly. But that gives a wrong message to the views. With the new laws, this problem will be handled and influencers will be more vigilant.
This is such a relevant post for influencers. High time that they be held accountable for brands or products they endorse. Their viewers can now be convinced of right information.
Therefore I promote only brands that i use or will use in the near future. And as for creams, i mention how they feel on the skin and not what the brand claims to achieve by using their brand… Influencers have a responsibility.
I was reading about the same few days back and happy that you shared right and clear information about the same. Thanks it was much required.
Awesome! indeed a great move by Indian Government. This new law is certainly going to raise the bar of influencer’s rationality and reliability. Also it will bring a good decision making quality among influencers in choosing the right product to advertise rather than picking any product to get paid.
Very insightful post. I agree now a days I am seeing so many influencer promoting anything and everything for easy money. And getting paid followers have become a trend. Tax on them will definitely make them accountable.
I had no idea that such a thing is happening – this is informative and interesting. Id love to see how this affects and changes the influencer ‘market’ and how the government will execute these changes.
i do agree that a recommendation should be backed up with genuine experience.
You are so right. I have actually refused to endorse so many products that I would never use or thought they were sub-standard. When I see influencers raking in millions, I wondered how they were not taxed for the unrealistic income. It is good to see that laws have changed. Thanks for the enlightenment.I have never heard of this before.
Guidelines by the government will bring regularisation to the Influencer sector. Now brands will also understand the stats and influencers also about the commissioned assignment.
You have raised some valid points here. Yes, everyone is an influencer these days and people promote anything and everything for free goodies or cash. Genuine reviews and honest promotions should be there. It’s nice that some laws are getting enforced for influencers’ payments.
Oh i know the buzz and confusion this new tax law created . Thankfully you shared right and clear information about the same. Thanks it was much required.
Very informative post. I agree that nowadays, so many influencers promote anything and everything for quick money. It will indeed improve the decision-making quality of influencers in selecting the right product to advertise rather than choosing any product to get paid for.
THere is a lot of buzz about this new Income Tax provision, and still a lot of confusion too. Your post is really timely and gives a clear perspective of the issue. Sandy N Vyjay
I find this TDS thing on barter still confusing. Is the 20 k annual limited for all the stuff in general, or 20 k from a single agency in a year or 20 k from a specific brand. It’s really so confusing.
I read about this in the papers and was as confused as the next person. Thank God for throwing some light on this topic. I am happy that now social media is being taken as a serious profession that people might want to pursue. I still believe it works best as a labor of love.
I was reading about this a few days back. Its good that the influencer industry is being taken seriously finally.
Your post made everything clear on the topic and yes rightly said, with the tax regime coming in place in India, we can expect more genuine reviews and recommendations by the influencers
Having a set of rules by the Government for this also means that influencer sector is now being recognised and taken seriously! It’s a step towards betterment for both the influencers who’ll be more responsible now and the individuals who place their trust in them !