If you are a social media influencer, you will now have to take a tax reduction from July on any gifts or freebies you receive from companies to promote their products. Gifts, samples, and other promotional materials supplied to social media influencers will be classified as “income” for the influencers and will be subject to TDS (or Tax Deducted at Source), according to a recent announcement by the Central Board of Direct Taxes (CBDT). The new Income Tax regulations will require a 10 per cent TDS for “benefits obtained in cash or kind in a company or profession.” The new TDS rule will come into effect from Jul 1, 2022.
Finance Act 2022 inserted a new section 194R in the Income-tax Act, 1961, which was notified during the Budget speech of finance minister Nirmala Sitharaman earlier this year.
“The new section mandates a person, who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source at 10 per cent of the value or aggregate of the value of such benefit or perquisite, before providing such benefit or perquisite,” said the CBDT in its notice dated June 16, Thursday.
However, if the product is returned to the company after using the services, it will not fall under section 194R.
This deduction is not required to be made if the value or aggregate of the value of the benefit or perquisite provided or likely to be provided to the resident during the financial year does not exceed Rs 20,000, the CBDT clarified.
Twelve studies of five verticals in the Asia-Pacific region done by Facebook found that pairing branded content ads with day-to-day campaigns led to a 40 per cent higher click-through rate, 87 per cent higher likelihood of more content views, and 80 per cent likelihood of more purchase conversions four times lift on purchase conversions, on average.
By the end of 2021, the Indian influencer marketing market is projected to be worth Rs 900 crore, according to GroupM INCA’s India Influencer Marketing Report. The market is anticipated to expand at a compound annual growth rate (CAGR) of 25% through 2025 when it is projected to reach a value of Rs 2,200 crore.
“Over the last few years, brands have shown significant interest in influencer marketing. The pandemic has accelerated the adoption of influencer marketing by brands making it an integral part of the brand marketing strategy and is now an important part of our media mix recommendation to brands,” Prasanth Kumar, CEO, GroupM South Asia, said.
With influencer marketing growing every day, the new TDS rule for influencers in India is going to affect the market in one way or the other. Let’s see which way it goes!