The new tax regulation on influencer gifts and earnings is expected to formalise the creator economy and take it mainstream

Christina Moniz  |  July 25, 2022

This month on, social media influencers and content creators will be paying 10% tax deducted at source (TDS) for gifts or services exceeding `20,000 in value annually. This is as per the Finance Act 2022 which introduced a new Section 194R in the Income Tax Act, which also stipulates that if the TDS is not paid by the recipient, then a penalty may be imposed. Given that many brands employ barter collaborations with influencers, exchange gifts or products for content that feature them, it will be interesting to see how the new tax regulations will impact both—content creators and brands.

Paying the price

It is still unclear if the tax should be borne by the brand or the creator, observes Ankit Agarwal, CEO & founder, Do Your Thng, an influencer marketing firm. “The new tax is more likely to affect nano influencers (who have 1,000-10,000 followers) and micro influencers (10,000-50,000 followers). Consider travel influencers who are compensated with hotel stays or plane tickets in exchange for honest reviews and opinions. The cumulative tax on all products or services they receive is not a small sum, especially for budding content creators,” says Agarwal, noting that small-time influencers may see a short-term downswing.