Social Media Influencers to pay 10 percent TDS on Free Gifts

The guidelines stated that such perquisites can either be in cash or kind or partially in both of these forms.


Everybody in the country wants to be a social media influencer because of the easy accessibility of the internet. Since they receive freebies for promoting brands, social media influencers are incredibly alluring to the general public. If you are a social media influencer, you must abide by the new income tax law that takes effect next month and requires a 10% tax deducted at source (TDS) on gifts received as part of promotional deals. 

Guidelines on the applicability of new TDS regulations involving advantages obtained in a business or profession were released by the Central Board of Direct Taxes (CBDT) last week. The guidelines stated that such perquisites can either be in cash or kind or partially in both of these forms. It stated that the nature of the asset delivered as a benefit or perquisite is irrelevant and that the payer/deductor need not determine whether the amount in the recipient's possession is taxable. Even capital assets provided as a reward or perk are covered by Section 194R.

Sellers who offer incentives in-kind or in cash or kind for example car, TV, computer, gold coin, mobile phone, sponsored trips, or free tickets, but which are not discounts or rebates, are subject to the provisions of Section 194R. According to CDBT, social media influencers would be required to pay a TDS of 10% if they decide to keep the goods that were given to them for use in sales promotion. TDS will not be applied to the product if they return the equipment to the business after the job is finished, according to the Central Board of Direct Taxes in the given instructions.

“Whether this (product given for promotion activities in social media) is benefit or perquisite will depend upon the facts of the case. In case of benefit or prerequisite being a product like a car, mobile, outfit, cosmetics, etc and if the product is returned to the manufacturing company after using for the purpose of rendering service, then it will not be treated as a benefit/prerequisite for the purposes of section 194R of the Act. However, if the product is retained then it will be in the nature of benefit/perquisite, and tax is required to be deducted accordingly under section 194R of the Act,” the CBDT notification explained.

Moreover, the CBDT made it clear in its circular that the sales discount, cash discount, and rebates granted to clients will not be subject to tax deduction under section 194R of the Income Tax Act. If free samples are offered, though, the situation would get a little more complicated because the relaxation does not apply to them.

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