TDS Applicability on Payments Made to Social Media Influencers

[Ramanathan Seshan]

Dear Experts,

We engage social media influencers for the promotion of our products. Kindly clarify whether Tax Deducted at Source (TDS) is applicable on payments made to such influencers for such promotional activities. If TDS is applicable, under which section of the Income Tax Act should the deduction be made?

Regards,

S Ram

[YAGAY andSUN]

Yes, TDS is applicable on payments made to social media influencers for promoting your products.

The Income Tax Department has issued specific clarifications on this matter, especially in light of the increasing use of digital influencers for marketing. The applicability of TDS depends on the nature of the arrangement and whether the influencer is providing services as a professional or in kind (e.g., receiving free products instead of monetary payments).

📢 Nature of Service:

Engaging social media influencers typically involves:

• Promoting your product or service through posts, videos, reviews, or reels.
• Creating and sharing content on platforms like Instagram, YouTube, Twitter, etc.
• This constitutes a professional service involving personal brand value and promotional skill.

✅ TDS Applicability:

🔹 Section 194J – Fees for Professional or Technical Services

Applicable when:

• The influencer is a professional (content creator, marketing expert, etc.) providing services for a fee or consideration.
• This is the most common case when a company pays influencers for marketing or brand promotion.

🔹 TDS Rate:

• 10% on the amount paid (excluding GST, if shown separately).

🚨 CBDT Clarification (Circular No. 12 of 2022 – dated 16.06.2022)

The CBDT clarified that when social media influencers receive a product and retain it after promotion (e.g., mobile phone, apparel, cosmetics), and it's consideration for the service rendered, TDS under Section 194R (not 194J) may apply.

So we have two scenarios:

Scenario	Applicable Section	TDS Rate
Influencer is paid in money for promotion	Section 194J	10%
Influencer is given products as consideration (retains the product)	Section 194R	10% (no threshold if benefit > ₹20,000/year)

If the product is returned after promotion and not retained, 194R does not apply.

✅ Summary Table:

Particulars	Details
Nature of Service	Product promotion by influencer
If Paid in Money	TDS under Section 194J @ 10%
If Paid in Kind (Product Retained)	TDS under Section 194R @ 10%
Exemption Threshold for 194J	₹30,000 per FY per influencer
Exemption Threshold for 194R	₹20,000 aggregate benefit per FY per influencer
GST Exclusion?	TDS under 194J is on base amount, excluding GST if shown

 

🧾 Example:

• You pay an influencer ₹50,000 for an Instagram campaign:
  • Deduct TDS @ 10% = ₹5,000 under Section 194J.
• You give an influencer a ₹25,000 smartphone to review and retain:
  • Deduct TDS @ 10% = ₹2,500 under Section 194R (deducted in kind, or paid by company if not recovered from influencer).

***

[Ramanathan Seshan]

Dear Yagay-sir,

Thanks for your valuable response.

Regards,

S Ram

AI Summary

Social Media Influencers Face New Tax Rules: TDS Applies to Monetary Payments and Product Compensation Under Sections 194J and 194R Social media influencers' promotional services are subject to Tax Deducted at Source (TDS). When influencers receive monetary payments, TDS applies under Section 194J at 10% rate with a Rs.30,000 annual exemption. If influencers retain products as compensation, TDS falls under Section 194R at 10% with a Rs.20,000 annual threshold. Companies must deduct TDS based on the nature of compensation provided to influencers.