Hi guys! So here’s the new tax

For many social media is an escape from real life For others itrsquos serious business A report by GroupM INCA pegged Indiarsquos influencer marketing industry at Rs 900 crore in 2021 and predicted that it could grow at a compound annual growth rate CAGR of 25 per cent till 2025 to reach R2200 crore These large figures have not missed the eye of the government which introduced a new section 194R in Finance Bill 2022Coming in effect from next month it requires tax deduction at source TDS at the rate of 10 per cent by any person providing any benefit or perquisite exceeding Rs 20000 in a year to a resident arising from the business or profession of such residentldquoWe are still figuring it outrdquo said most influencers and social media agencies we spoke to ldquoMy first reaction was lsquoOmg Does this mean I have to pay tax on every gift I receiversquordquo says the OG of the industry Malini Agarwal founder and creative director of MissMalini Entertainment ldquoBut then I spoke to a few people and they told me that the brands would have to deduct tax at their end ie source if they give influencers products worth Rs 20000 or more in a year and if the influencers choose to keep themrdquoThis is an extension of a rule introduced almost two decades ago to govern perquisites known popularly as perks says Thanebased chartered accountant Vikas Waghmare Explaining the new rule he says ldquoIf a social media influencer payee is given anything by a companybrand payer amounting to or over Rs 20000 in a year which the payee chooses to retain then the payer must pay TDS The freebies worth Rs 20000 or more should come from one source per year for section 194R to be applicablemdashsay a content creator receives beauty products worth s from Brand A Rs 8000 from Brand B and Rs 10000 from Brand C then 194R does not apply But if an influencer receives beauty products worth Rs 5000 in July a gift hamper worth s Rs 8000 in September and another worth Rs 10000 in March all from Brand A then it is applicablerdquoChennaibased Rebecca Roy who creates travel content as OdysseyOfTwo with her partner Gowthaman Ilambarathi is hopeful that this will streamline the industry She is however not sure how it will impact her work where fight tickets and stay easily cross the Rs 20000 bracketThe section applies to companiesindividuals giving incentives other than discounts or rebates in cash or kind including cars TVs computers gold coins mobile phones sponsored trips free entertainment tickets etc While the TDS will be borne by the brands it will reflect in the influencerrsquos incomeldquoUntil nowrdquo explains Waghmare ldquosay an influencer is paid Rs 5 lakh in fees in a financial year and received perks worth of Rs 3 lakh their income wasnrsquot taxable But now how many of these perks crossed the Rs 20000 limit will be noted If the perks were two gadgets worth Rs 50000 and a trip worth Rs 80000 the influencerrsquos income will Rs 5 lakh plus Rs 18 lakh She will be required to pay tax on Rs 68 lakhrdquo However if the products are returned to the company once the promotional activity is over they wouldnrsquot have much to worry aboutMasoom MinawalaThe problem content creators point out is the barter system that is prevalent in the social media influencer industryldquoBrands will stop sending laundry list of influencers out to their agencies and work on a more curated list to get the bang for their buckrdquo says Viraj Seth Cofounder and CEO of Monk Entertainment a Mumbaibased digital media organisation ldquoI think this move will actually reduce the number of barter associations in the industry which is fantastic for creators but not so much for brandsrdquoldquoThe smaller brands rely more on barter systemsrdquo says Natasha Kothari CEO of Studio UnGap a citybased social media agency ldquobecause they donrsquot have the means to go for a fullfledged influencer marketing campaign Products costing anywhere between Rs 2000 to Rs 60000 are sent out to the influencers depending on their profile Up until now the process has been a fairly smooth We share a list of suitable influencers with a brand they approve and then gifts are sent to the influencers to promote Everyone is a bit uncertain now about how things will be done in the future However I do see a decrease in the number of influencers that a brand would targetrdquoMalini Agarwal Viraj Sheth Natasha Kothari and Natasha KothariInfluencers though are happy this will lead to a better system ldquoThe creators will now be extremely selective about what we acceptrdquo says fashion influencer and entrepreneur Masoom Minawala ldquowhich will result in transparency between curators and their communities and also aid a more sustainable and mindful approach to consumption Unfortunately this will take away the hope for smallscale brands to scale up through creatorsrdquoChennaibased Rebecca Roy who creates travel content as OdysseyOfTwo with her partner Gowthaman Ilambarathi is hopeful that this will streamline the industry ldquoIt could limit the barter system and pave the way for an outright fee as it should berdquo she says Rebecca is still figuring out how this will impact her work ldquoI am a travel content creator Flights as well as stay easily cross the Rs 20000 bracket Sometimes we receive gadgets to shoot our content better and they can cost up to Rs 100000 But I wonrsquot disguise my work I would rather work with the government to ensure everybody is accounted for Irsquoll increase my fee if neededrdquoSome of the experiences like travel and food may come under a new rule in the coming days or months says Waghmare ldquoWhile gadgets jewellery watches and luxury goodsmdashif retainedmdashwill be taxable travel is a grey area An influencer can write it off as a business expense because that is hisher job and isnrsquot something that can be returned We should have some clarification soonrdquoContent creator and founder of fashion label Arabellaa Juhi Godambe Jain says ldquoIt is good that the industry has caught the governmentrsquos eye Initially it wasnrsquot taken very seriously Lately more people including the government have realised the power of social media and the kind of money it is churning which is why rules are being laid down to form some framework I see it as a positive steprdquo Priyanka Khimani a media strategist and celebrity lawyer agrees ldquoIn the larger scheme of things I think efforts are being made to regularise the creator economy which is growing at a very fast pace and witnessing a lot of transactions on a regular basisrdquo However Jain feels the need for better clarity ldquoIt wonrsquot be fair if we have to grapple with loopholes a clearer framework will help us know the dos and donrsquotsrdquo she says