TDS concept was introduced, to collect tax from the very source of income. According to the idea, a person (deductor) who is required to make a payment of a specific sort to another person (deductee) must withhold tax at the source and deposit it into the Central Government’s account. On the basis of Form 26AS or a TDS certificate provided by the deductor, the deductee from whose income tax source deductions have been made is entitled to get credit for the amount so deducted.
New Clause in TDS
The introduction of TDS at a rate of 10% for anyone giving a resident any advantage or perk exceeding Rs 20,000 per year resulting from their business or profession was made possible by the Budget 2022–23.
Influencers who receive free samples from brands or businesses must mention these in their income tax returns, and TDS will be due if they keep the gifts since they are considered a perk of the job. TDS won’t apply if the influencer returns the complimentary samples.
Influencer marketing platforms, which serve as a link between content creators and advertisers, have noted that many companies do not classify free samples or gifts given to influencers in exchange for social media posts as promotional expenses. Although a brand promotional expense, this went unnoticed since influencers failed to mention it when filing their tax returns.
New TDS rule’s effects
- Micro-influencers will be badly impacted because they largely work through barter associations. As they establish their foundation in the field, it gives them a chance to develop partnerships with these brands, according to Soni of IPLIX Media.
- Those with 100,000 to 1,000,000 followers are categorised as micro-influencers.
- As they receive review units for gadgets from brands to keep, tech influencers will be impacted by the tax legislation as well.
- Tech brands and influencers will now need to closely monitor these interactions. Influencers in travel receive hotel or airplane tickets in exchange for advertising. Working with these people would be challenging because influencers and brands used to benefit from one other.
Validation For Influencer
The new regulation was necessary since the industry is unorganised and the government intends to tax the entire sector as a whole.
At the government level, it is acknowledged that a new breed of professionals is emerging. This represents a huge endorsement for the (influencer) space. In general, experts like CEOs are included, but now an influencer is included as well.
The new tax legislation is also a wake-up call for agencies and creators who have been heavily utilising barter transactions, according to Pranav Panpalia, founder of influencer marketing firm OpraahFx. “While barter may be an effective means to receive payment in kind, it unquestionably doesn’t benefit producers,”
Earnings and brand deals
Pranav Agarwal, co-founder, of Sociowash, a digital marketing firm, expects such deals to decline due to the new tax rule.
However, other people don’t anticipate the new tax rule to have a significant financial impact.
Influencer Paritosh Anand, who produces content on various subject and has a social media following of about 200,000, thinks the new provision is complicated but adds that content creators’ profits won’t be impacted.
However, organisations predict that earnings will be affected to some extent. Such a clause will undoubtedly have an impact on influencers’ income because many collaborations are based on barter and sampling. The ambiguity may because some influencers to be wary of such partnerships altogether, according to Jindal.