Influencers paying TDS to make social media more reliable

Influencers get to keep a lot of the products they promote, and India has decided to tax them for these products. From clothes to bags to skin care products, to vacations to front row seats at a fashion show to first-class flight tickets, influencers receive all such kinds of benefits. And, now, India has decided to put a brake on this free right.

As per the latest Central Board of Direct Taxes (CBDT) guidelines, besides doctors who receive free medical products from pharmaceutical companies, social media influencers will now have a 10 percent tax deducted at source if they retain the product given to them for sales promotion.

This rule is expected to begin on July 1st as a part of the Finance Act of 2022, aiming to widen the tax base. TDS will not be applied if social media influencers return the product they promote online to the brands.

Influencers are largely responsible for impacting their followers’ purchasing decisions. They typically partner with different brands to create content in the form of posts, stories, or videos to advertise the products and services of the companies they work with. This helps them build their own personal brand, which increases future sales and customer loyalty for a business.

Besides getting paid for promoting someone else’s products, influencers get to keep the products they showcase, as well. In fact, the influencer economy is driven by the promotion of free products. The global influencer market is worth approximately $13 billion, and it’s expected to grow to $16 billion by the end of this year. In India alone, the creator market is worth $120 million.