Income tax department launches probe against social media influencers. Here’s why

By India Today Business Desk: The Income tax department has initiated a probe against certain social media influencers and content creators on platforms like YouTube and Instagram for alleged discrepancies in reporting their income and profits, according to official sources quoted in a PTI report.

The probe was launched last week after the department conducted searches on approximately 10 YouTubers and other social media influencers, primarily young artists and actors, based in Kerala.

Sources reveal that a data analytics investigation conducted by the department uncovered that these influencers and content creators were earning significant incomes but either failing to disclose or under-reporting them in their income tax returns (ITRs).

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This discrepancy is largely attributed to their lack of awareness about tax laws.

Social media influencers and online content creators have the ability to influence their audience’s purchasing decisions or opinions about a product, service, brand, or experience due to their authority, knowledge, position, or relationship with their followers.

Notices issued

During the evidence-gathering process and the recording of their statements, the individuals searched in Kerala were reportedly treated with utmost cooperation by the tax department, indicating a non-adversarial approach. Furthermore, notices have been issued to these individuals to determine their precise tax liabilities.

Similar action has also been initiated against additional social media influencers in different parts of the country. The department is currently examining the social media activities of certain celebrities as well.

According to sources, the tax department has obtained crucial information about these online influencers and content creators.

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This includes details of their brand endorsements, both paid and unpaid promotions, expenditure incurred using various financial instruments such as debit and credit cards, and their contractual arrangements with social media platforms like YouTube and Instagram, where they earn income based on specific engagement metrics.

The tax department utilized the tax deducted at source (TDS) database to gather relevant data before conducting the searches and issuing notices. The Central Board of Direct Taxes (CBDT), the administrative authority of the income-tax department, introduced new TDS provisions in the previous year concerning benefits received in a business or profession.

As per the provisions, any person providing benefits or perquisites exceeding Rs 20,000 in a year to a resident is required to deduct tax at source at a rate of 10 per cent.

This investigation highlights the increasing scrutiny of social media influencers and content creators in relation to their income reporting and tax compliance. The tax department aims to ensure transparency and adherence to tax regulations in this rapidly growing industry.

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