Making Money from Social Media? Learn the Right Way to File Your Return
Nowadays, many people are making money through social media platforms by posting content, doing brand collaborations, and sponsoring products online. The trend of earning money online is mostly popular among the youngsters using platforms like YouTube, Instagram, Facebook, etc. But do you know this income is taxable?
If you are a social media influencer earning from advertisements, affiliate marketing, brand sponsorship, paid collaborations, etc., through posting videos on social media platforms, your income is taxable. Under the Income Tax Act, if the main source of your income is a social media earning, such income is treated as business income. But, if this income is received apart from a salary or any other main source of income, it is treated as ‘income from other sources‘.
In India, there is a slab system, based on which the tax rate applies to the income. The taxpayers who earn more pay a higher rate of tax. So, whether you are earning from a full-time job, running a business, or making money online, all this is clubbed together.
Which ITR Should Social Media Earners Choose?
It is important to select the correct ITR form. Here is the brief introduction of each ITR Form:
- ITR-1: It is for individuals who have income from a salary.
- ITR-2: For Taxpayers having income from salary and capital gains.
- ITR-3: For taxpayers with business and professional income, along with capital gains
- ITR-4: It is meant for taxpayers with business or professional income under the presumptive taxation scheme.
Generally, the income earned by social media influencers falls under the professional or business income. Therefore, they are usually required to file ITR-3 or ITR-4.
Which Tax Regime to Choose?
Under the Income Tax Act, there are two tax regimes: the New Tax Regime and the Old Tax Regime. The old tax regime offers several deductions and exemptions. However, the new tax regime has reduced rates but does not offer as many exemptions and deductions as compared with the old tax regime. YouTubers filing ITR-3 or ITR-4 should carefully examine which regime is beneficial and saves more tax. Once you select the regime, it cannot be changed frequently.
Important Things to Note for Social Media Influencers
Many influencers earn from mutual funds, real estate, and the stock market, which are treated as capital gains and must be declared separately. Additionally, it is important to note that the creators must keep detailed records of the income sources and the expenses as well. The expenses, such as internet costs, editing expenses, and camera or other device costs, can be claimed as business expenses. This will reduce your taxable amount.
