Social media platforms, old or new, have witnessed the sharp rise of influencer marketing in the past 2-3 years. You must have heard about influencers receiving freebies or gift hampers for promotional posts. Some of those hampers might have made you feel jealous, no? But as they say, nothing comes free in this world, not even the freebies or promotional products influencers get. All thanks to a new TDS rule, which the Indian government introduced in the budget.
So, what’s this new TDS rule every influencer is talking about?
Under this new TDS rule, which came into effect on July 1, 2022, influencers will have to pay 10% TDS on the freebies and commercial barters exceeding Rs 20,000 in a year received from companies for influencer marketing purposes. Now, this rule is not specifically applicable to influencers alone. It’s applied to all doctors as well who get medicines or other free medical samples from promoters.
It may look like a lot to take in, but there’s a catch. Read on till the end to know what it is.
But first, let’s look at how this new tax will impact influencers.
Influencers and influencer marketing have become one of the new-age techniques for marketeers who look to market their products on a micro level. It’s no news that influencers used to charge plenty for these sponsored posts and at times got expensive freebies as well for the promotion purpose.
With this new TDS rule in play, influencers now have to show all the freebies or commercial barters while filing their tax returns. If any of the said freebies will exceed the amount of INR 20,000 the government will charge them 10% TDS.
This, some influencers believe, will reduce the barter or sponsored opportunities they use to get but not that much. Some small influencers though believe that this new tax will impact them greatly as companies will not reach out to them with barter opportunities.
But, that’s not how everyone is looking at it. While doing our research, we came across many expert comments where they feel that this new tax can be a win-win situation for both influencers and companies paying them for promotions.
Some others said new regulations may cause inflammation in the influencer marketing domain for influencers will charge companies extra to recover their tax money.
On a broader scale, the influencer marketing industry is split into two halves. One side favours the tax, and the other is still sceptical. However, which side is right only time will tell.
What’s the catch for influencers?
Levying taxes on services is not new, but you must be wondering, influencers have been doing tax-free sponsored posts for a long time, so why levy tax on their freebies now? Well, to say the least, the industry is growing and leaving enough impact that the government felt the need to introduce this new tax.
Talking about the catch we mentioned earlier, though influencers are supposed to pay 10% TDS on freebies, they get, if they return them to promoters, the tax won’t apply to them.
Interesting, no?
Key takeaway!
This new tax rule may look like a hurdle, but it’s nothing but a small glitch that we can help you overcome. If you’re new to the world of influencers or looking for influencers to market your product, ClanConnect can help you.