The Income Tax Department has initiated an investigation into social media influencers and content creators on platforms like YouTube and Instagram. These individuals are suspected of not disclosing their income and profits in accordance with their earnings, according to official sources.

Last week, the department conducted searches on approximately 10 YouTubers and social media influencers, primarily young artists and actors, based in Kerala. The investigation, which utilized data analytics, revealed that these individuals were earning substantial amounts of money but either not reporting or underreporting their income in their tax filings. This was largely attributed to a lack of awareness regarding tax laws.

Social media influencers and online content creators have the ability to influence their audience's purchasing decisions and opinions about products, services, brands, or experiences due to their authority, knowledge, position, or relationship with their audience.

During the search operations in Kerala, the tax department treated the individuals with care while gathering evidence and recording their statements. Notices have also been issued to them as part of the ongoing probe to determine their exact tax liability.

Similar actions have been taken against additional social media influencers located in different parts of the country. The department is also examining the social media activities of certain celebrities.

The tax department has collected significant information about these online influencers and content creators, including details of brand endorsements, paid and unpaid promotions, expenses incurred through various financial instruments like debit and credit cards, and their agreements with social media platforms such as YouTube and Instagram, where they earn money based on specific parameters like reaching a certain threshold of social media engagement.

Before conducting the searches and issuing notices, the tax department accessed the tax deducted at the source database for these individuals and others involved.

The Central Board of Direct Taxes, the administrative authority of the Income Tax Department, introduced new provisions for tax deduction at source (TDS) last year concerning benefits received in a business or profession. These provisions specify that such benefits can be in the form of cash, kind, or a combination of both. The Budget for 2022-23 introduced section 194R in the Income Tax Act, which mandates a 10% TDS rate for any person providing benefits or perquisites exceeding Rs 20,000 in a year to a resident arising from their business or profession.

Influencers Under Scrutiny: Tax-Evasion Probe Launched Against Social Media Influencers By Income Tax Department