How are freelancers and social media influencers taxed in India?


Being self-employed doesn’t mean you don’t have to pay taxes. India’s income tax laws state that like salaried and professional taxpayers, self-employed persons are also liable to pay tax on their income.

According to the Income Tax Act, income derived from the demonstration of a person’s intellectual or manual abilities is considered income from a profession. This income is considered “business or professional profits and gains” because the income is treated as income from self-employment. The gross gain is an accumulation of all the receipts collected by the individual throughout the exercise of the profession.

Apart from the self-employed, social media influencers are also subject to income tax under the heading “business and professional profits and gains”.

Filing fees

A freelancer must opt ​​for ITR-3 or ITR-4 to file an income tax return (ITR).

Salaried persons who earn additional income during a financial year through self-employment outside their employment will also have to opt for an ITR form similar to that filled out by businessmen or professionals.

Deduction of expenses

The self-employed can deduct the expenses incurred to do the self-employment from their business income. These expenses will include rent for property taken by the Freelancer to perform the work, costs incurred to repair such property, costs incurred to repair electronic equipment such as laptop or personal computer used for the work, money used to buy office supplies, utility bills like internet and phone, work-related travel expenses, transportation bills, and the depreciation value of equipment like laptops.

The standard deduction of Rs 50,000 is not applicable to freelancers when filing an ITR. However, those who combine salaried and self-employed activity can claim the flat-rate allowance on wage income if they opt for the old tax system.

However, to claim expenses as a deduction, freelancers will need to ensure that the expenses are directly related to the work and spent within the tax year.

Tax calculation

To arrive at the tax payable, the taxpayer must determine the income from various sources and deduct the expense.

Sometimes employers deduct TDS before paying freelancers. Therefore, the TDS must be included in the calculation of tax payable.

withholding tax

Freelancers whose net taxable amount is Rs 10,000 and above will have to pay a tax advance every quarter before the due date.

Social Media Influencers

Social media influencers who generate income through referrals and ad money are taxed the same as a freelancer. Influencers, which do not fall under the category of companies and partnerships, are considered for tax purposes as self-employed persons carrying out a commercial or commercial activity. Their income is taxed according to the slab rates in force.

Influencers and bloggers, who earn an income above Rs 20 lakh in a financial year or Rs 10 lakh while living in a special category state, must register their service under the Commodity Tax Act and services (GST). This is because YouTubers, influencers, and bloggers earn their income through services categorized as online information and database access or retrieval services (OIDAR). Services are charged at the rate of 18% GST.

(Edited by : Sudarsanan Mani)

First post: STI


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