TDS On Free Gifts for Social Media Influencers
- Nimisha Panda
- 3 hours ago
- 8 min read
Social media influencers are among the highest-paid people in the world today. They use sponsorships, brand agreements, and social media to generate a sizable revenue. In addition to these, social media influencers frequently receive cash and in-kind gifts, prizes, and other freebies, which frequently go unreported and unacknowledged, costing the government a significant amount of money. The Indian government recognised this and included section 194R in the Finance Bill 2022. People are required by this provision to declare such freebies, benefits, and privileges in their ITR and pay taxes on them.
Table of Contents
How Much Do Influencers Charge in India?
Approximately 1,50,000 of the 25–35 lakh content creators in India are able to make money from their work. Even while more Indians are becoming influencers, many still do not pursue this as a full-time career. As a result, Indian influencers work fewer hours than their international counterparts. The amounts these influencers charge depend on various factors.
Lifestyle creators get 30 to 50 paisa per view, while fashion influencers get 40 to 60 paisa per view. Their pricing is based on cost per thousand views (CPV). While finance creators charge between Rs 3 and Rs 4 per view, niche creators, like a doctor creating health material, charge only Rs 1-2 per view.
Earnings for influencers vary depending on the platform. According to a Kofluence report from 2024, Instagram mega-influencers charge between Rs 3 and Rs 5 lakh for short-form video content (SFVC), such as IG reels and YouTube clips. This is more than their YouTube counterparts, who price between Rs 1.2 and Rs 3 lakh.
The follower size also determines the charges. Micro influencers have between 10,000 and a lakh followers, while nano influencers have between 100 and 10,000. The followings of macro and mega influencers range from one lakh to one million, and more than one million, respectively. YouTube superstars made between Rs 1 and Rs 5 lakh each video, while Instagram celebrities (who are more prominent than mega influencers) made between Rs 7 and Rs 15 lakh.
According to the survey, micro-influencers consistently in India earned between Rs 20,000 and Rs 50,000 each video on Instagram. Those on YouTube made between Rs 20,000 and Rs 39,000. In contrast to their YouTube equivalents, who made between Rs 40,000 and Rs 1 lakh, Instagram macro influencers made between Rs 60,000 and Rs 1.6 lakh.
Besides these payouts, influencers also get freebies from the brands they promote. Taxation on these free gifts is rather tricky in comparison to the direct income they get from their social media posts. Let us explain the rules regarding the taxation of free gifts brands give to social media influencers in India.
What is Section 194R of the Income Tax Act?
Section 194R requires that TDS be deducted at a rate of 10% from free gifts or perquisites with a value exceeding 20,000. This section addresses both financial and non-financial benefits. Furthermore, it will also include discounts, freebies, vacation packages, and other perks that companies receive. This provision, to put it simply, subjects the assessee's income to TDS and accounts for the value of gifts like that.
Reason For New Provision Under Section 194R
The value of any perquisite or benefit, whether or not it could be converted into cash, was to be included in the taxpayer's total income. Moreover, it was also subjected to taxation under the heading of "profits and gains from business or profession" under Section 28 of the ITA. In a few cases, nevertheless, the individuals failed to disclose on their income tax return that they had received the advantages. As a result, inaccurate income details would be provided. The ITA's Section 194R was created to do away with these disparities.
Impact On Social Media Influencers
Multiple manufacturing companies provide their items to social media influencers for digital platform promotion. Taxes must be withheld in accordance with Section 194R of the ITA for any freebies, advantages, and perquisites, whether in cash or in kind. These may include a car, a television, a computer, a gold coin, a mobile phone, international travel, and complimentary event tickets provided to encourage sales. However, if such items are given back to the manufacturing company, they won't be regarded as a perquisite or benefit. All these freebies, perks, and perquisites must be declared on the income tax return, and even though they aren't being sold, they shouldn't be ignored.
For instance, a travel blogger who boards a plane for a sponsored excursion. The corporation reimburses the Rs 30,000 aircraft ticket and provides a complimentary stay that would have otherwise cost Rs 20,000. In addition, the company is paying for a promotion for him or her. The company would distribute the Rs 50,000 (Rs 30,000 + Rs 20,000) after deducting Rs 5,000 in taxes. Likewise, if a business provides a social media influencer with a cell phone for review purposes and the influencer maintains it, it will be deemed a benefit, and TDS will be subtracted.
When is Section 194R Not Applicable?
In the following circumstances, Section 194R is not relevant:
During the fiscal year, the perk or perquisite does not surpass Rs. 20,000.
Section 195 requires tax to be withheld if the beneficiary is a non-resident.
The total income earned by the person providing the benefit or perquisite from their line of work does not exceed 50 lakhs, or their business turnover was less than 1 crore in the preceding year.
Employees who get benefits from their employers are exempt from this item. In situations where the parties to the transaction have no commercial relationship, this provision is not applicable.
Taxability and Valuation of Benefits and Perquisites
The individual granting the perquisite shall withhold 10% TDS, regardless of the recipient's financial liability. It is not even required to check the section under which it is taxable. Additionally, tax under Section 194R is considered deductible even when the benefit is a capital asset, such as a car, or an immovable object, such as property.
Section 194R mandates a tax deduction, irrespective of the type of benefit given, including in-kind or cash benefits. In this context, Section 194R stipulates that the individual or business providing the perquisite must make sure that taxes have been paid before releasing the perquisite if it is entirely in kind or partially in cash and partially in kind, and the cash component is less than the amount that must be deducted.
All benefits obtained in kind, whether in full or in part, would be valued using the fair market value (FMV). The purchase or manufacturing of the perquisites by the benefit provider would be a unique scenario. The purchase price or the amount that clients pay will then be considered the perquisite's value.
Tax Deduction for Social Media Influencers
The responsible individual or organisation must make sure that the beneficiary has deposited the relevant tax in the form of an advance tax if TDS is not withheld. The beneficiary or social media influencer may present the following documentation to the responsible person or business, attesting to the deposit of the tax that must be withheld from the benefit or perquisite:
A copy of the advance tax challan
The government has added provisions in Form No. 26Q for such transactions as part of the reporting procedure, and these measures will take effect in the fiscal year (FY) 2022–2023.
Another option is for the accountable individual or business to deduct TDS from the benefit or perk and submit the money to the government. Form 26Q of the TDS return is where any disclosure of such a deduction must be made.
Conclusion
Are you an influencer on social media trying to reduce your tax liability? You do not have to look anywhere else. In addition to maximising your tax savings, our tax professionals can assist you in effectively filing your ITR and maintaining your tax compliance. Our professionals offer comprehensive tax-related services that are customised to meet your needs, from tax planning to tax filing. You can hire a tax professional, and your tax trip will be smooth.
Frequently Asked Questions
How much does Instagram pay for 1000 views in India?
Instagram's direct monetisation initiatives typically pay out between Rs. 10 and Rs. 80 per 1,000 views (around $0.10 to $1 USD) to the majority of Indian creators. Reels typically fetch between Rs. 20 and Rs. 50 ($0.25 and $0.60) per 1,000 views, depending on the audience demographics, engagement, and content specialty.
What is the TDS rate under Section 194R if the PAN is not given or in the case of a non-filer recipient?
In this instance, 20% TDS will be applied.
What would be the time of deduction of TDS under Section 194R?
It would be prior to offering the perquisite or benefit.
Will a product given to social media influencers for promotion be considered a benefit or a perquisite?
Yes, unless the product is used to provide a service and then returned to the corporation.
How to compute the threshold of Rs 20,000 in a particular financial year?
The Income Tax Act's Section 194R became operative on July 1, 2022. However, people must take into account any benefits or privileges given before June 30, 2022, when determining the Rs. 20,000 threshold. TDS is not necessary for payments made between April 1, 2022, and June 30, 2022, despite this.
Are Instagram gifts taxable?
In most cases, influencers are not subject to tax consequences. TDS compliance is necessary, nevertheless, if a brand offers a product in return for advertising or promotion, as this is deemed a benefit or perquisite under Section 194R.
Are social media influencers paid?
Influencers are compensated by brands to promote goods and services through sponsored promotions. Leading figures on social media can make a lot of money, but some influencers only get small payments or free goods. Sponsored promotions use an influencer's following to help firms become more visible online.
Are free gifts received by influencers taxable even without cash payments?
Yes. As per Section 28(iv) and 194R, the fair market value (FMV) of gifts like gadgets, travel, or hotel stays must be declared as income if given for promotion.
Who is responsible for deducting TDS on influencer gifts?
The brand or agency giving the gift must deduct 10% TDS under Section 194R if the total value exceeds ₹20,000 in a financial year.
What if the brand doesn't deduct TDS on the gifted item?
In such cases, the influencer is still liable to report and pay tax on the market value of the product under business income or other sources.
Can influencers avoid TDS if the gift is returned?
If the product is returned unused and there is no promotional activity, then it's not considered income, and TDS may not apply.
How should influencers report such gifts in their ITR?
The FMV of the gifted item should be added as income under “Income from Business or Profession,” especially if the influencer is regularly collaborating with brands.
Is GST applicable on such gifts received?
Possibly, if the influencer is GST registered and offers services against the gift. A barter transaction may be subject to GST obligations.
What about foreign brands sending products to Indian influencers?
If the sender is outside India and no TDS is deducted, the influencer must self-disclose the FMV in their ITR. It could also trigger FEMA and foreign exchange reporting obligations.
Are barter collaborations considered income even without invoices?
Yes. Any value exchange for promotion, whether invoiced or not, qualifies as taxable income and must be declared.
Is Section 194R applicable only to influencers?
No, it applies to any person receiving benefit or perquisite in a business capacity — but is especially enforced in the influencer and creator economy.
Can influencers get tax credit for TDS deducted under 194R?
Yes. The deducted TDS will reflect in Form 26AS and can be claimed while filing ITR, reducing overall tax liability.
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