Big news created a buzz for creators in the last week, the Income Tax Department performed searches on around ten YouTubers and other social media influencers headquartered in Kerala, particularly young artists and creators.

In short, the Department looks for roughly ten YouTubers and influencers in Kerala.

Notices are given to ascertain an individual’s exact tax obligation.

Other regions have taken similar action against social media influencers.

Details

According to official sources, the income-tax department has initiated an investigation into some social media celebrities and content creators on platforms such as YouTube and Instagram for allegedly failing to report their income and profits commensurate with their earnings. The department launched the operation last week after searching for roughly ten YouTubers and other social media influencers in Kerala, largely young artists and actresses. According to the sources, the department conducted a “data analytics” investigation and discovered that these social media influencers and online content creators make “substantial” earnings but do not show or under-report them in their income tax returns (ITRs) or filings, owing to a lack of understanding of tax laws.

The Central Board of Direct Taxes (CBDT), the administrative body of the I-T department, introduced new TDS laws last year covering advantages obtained in a company or profession, stating that such benefits might be in cash, in kind, or a combination of both.

The Budget 2022-23 included a new section — 194R — in the Income Tax Act that compels any person who provides any benefit or perquisite to a resident that exceeds Rs 20,000 in a year, coming from such resident’s business or profession, to deduct tax at source at the rate of 10%.

According to the sources, the department also used the tax deducted at source (TDS) database before examining these individuals and issuing notifications to others.

Because of their authority, knowledge, position, or relationship with their audience, social media influencers and online content providers have the capacity to address and influence their audiences’ purchase choices or views about a product, service, brand, or experience.

According to the sources, the tax agency treated the persons searched in Kerala “very gently” during the process of obtaining evidence and even recorded their statements. These people were also served with notifications as part of the investigation so that their “exact tax liability” could be ascertained, they added.

More social media influencers from different parts of the nation have been targeted similarly, and the department is also investigating the social media activity of some celebrities, according to sources.

According to the sources, the tax department has gathered “vital information” about these online influencers and content creators, such as brand endorsements, paid and unpaid promotions, expenditure incurred using multiple financial instruments such as debit and credit cards, and agreements with social media platforms such as YouTube and Instagram, where they earn money based on certain parameters such as gathering social media engagements beyond a certain threshold.

Notices have been issued

The persons searched in Kerala were apparently handled with maximum cooperation by the tax department during the evidence-gathering procedure and the recording of their statements, showing a non-adversarial stance. Additionally, notifications have been delivered to these people in order to ascertain their exact tax liabilities.

Similar legal action has been taken against other social media personalities around the nation. The department is also investigating some celebrities’ social media practices.

The tax agency, according to reports, has gathered critical information on these internet influencers and content providers. 

Before conducting searches and sending notifications, the tax authorities used the tax deducted at source (TDS) database to obtain pertinent data. In the preceding year, the Central Board of Direct Taxes (CBDT), the administrative body of the income-tax department, adopted new TDS laws governing advantages gained in a company or profession.

According to the regulations, anybody who provides perks or perquisites to a resident in excess of Rs 20,000 per year is obligated to deduct tax at source at a rate of 10%.

This analysis demonstrates the growing attention placed on social media influencers and content providers in terms of income reporting and tax compliance. The tax department’s goal in this rapidly increasing business is to assure openness and respect for tax legislation.

30 more social media personalities are under investigation by the IRS for possible tax fraud. According to the report, a Mumbai-based fashion influencer with an annual salary of only Rs 3.5 lakh was paid more than Rs 30 lakh for numerous postings from a single firm. Aside from that, the individual was receiving gifts from such firms.

Outcome 

These are known as Online Information and Database Access or Retrieval Services (OIDAR), and under the goods and services tax law, anyone who earns more than Rs 20 lakh in a fiscal year is required to register such services, which are subsequently taxed at 18%.

There is also a system in place to tax the gifts that these influencers receive. Section 194R of the Income Tax Act requires a 10% tax to be deducted at source (TDS) on gifts and benefits worth more than Rs 20,000 obtained from brands for promotions. This took effect in July of last year.

According to the study, the inclusion of TDS allowed officials to trace the revenue of such influences. According to the Influencer Marketing Report from last year, this industry was worth Rs 900 crore in 2021 and is expected to grow to Rs 2,220 crore by 2025.

Is the Income Tax Department in the right direction?

While in India, many politicians, investors, film stars, and other big shots are continuously saving their so-called hard-earned money in Swiss Banks, there, why Income Tax Department is running like a cold-blooded Cheetah to the influencers? 

According to Stats of September 2022, Several registered unrecognized political parties (RUPP) around the country are being raided by income tax officers for allegedly stealing crores of rupees from the national exchequer. According to reports, the department initiated a coordinated effort against some RUPPs, their promoters, and connected businesses to investigate the source of their revenue and expenditure.

Raids are taking place at over 100 locations throughout India, including Gujarat, Delhi, Uttar Pradesh, Maharashtra, Madhya Pradesh, Chhattisgarh, and Haryana.

The move was taken after the Election Commission of India identified tiny political parties receiving donations and then offering tax discounts to people who gave. As a result, the money raised through donations is returned to the donors in cash after tax deductions.

Sources also said the massive, unbroken flow of black money (estimates range from Rs 6,000 to Rs 20,000 crore) within India’s underground economy has given rise to a diverse range of brokers, agents, companies, and other specialists, all engaged in the lucrative business of recycling black money into its various forms. Because of the need to stay undiscovered, black money transactions take on an exceedingly complicated character.

Despite the fact that the vast majority of Indian businesses, especially the Film Industry (particularly the dishonest ones) have never attended a business school, their inventiveness and astuteness in evading the tax net are famous. The black money operators are well ahead of the government, which has tried to close gaps in its different legal efforts.

So, the conclusion is, raids are happening to Political parties, film stars’ places, and all other big-shot areas, but ultimately the result is ‘what’ a nothing but zero. The Income Tax Department sleeps frequently after the interrogation and raids in the places. But no one will be arrested or go to jail for betraying 100 and 1000 crores of money every year. 

Now, it’s high time for us to think about this major issue and should question the Income Tax Department that what is going on in the country, and only we the common people, YouTubers, and others are prone to pay taxes for everything. If yes, then film stars, all political parties, and other big shots should also pay the proper income tax per year that must be shown with proper documents to the public. 

Don’t be shy guys, who can say, maybe you are the next one for these scenarios? Comment on the Inventiva news portal.