• Notification Date: 16-02-2022
• Notification No: N/A

Demands of Clarification Regarding TDS on Free Products for Social Media Influencers

The tax department does not consider the expenses of the taxpayers spent for gifts offered to business associates. Tax Deducted at Source (TDS) on this matter has remained unresolved for a long time. The amount spent on these considerations is to be treated as professional fees. So the taxpayers are required to deduct and deposit TDS as per the provisions of Sections 194J and 194C of the Income-tax Act. But some courts have passed different judgments in this matter. According to them, non-monetary considerations do not fall under Section 194J/194C.

A new Income-tax Section has been introduced to resolve the issues related to the tax base and compliances by the recipient who is being charged with tax deductions. Section 194R has been decided to be established by the Finance Bill, 2022.

TDS Deduction Procedure and Eligibility Criteria

TDS will be deducted from those residents who have been receiving perquisite or benefits under any business or other professions. Under Section 194R, the tax charged against the residents has been imposed by the ministry. The resident will be charged with the amount of TDS if they are a residential Indian. The place of receiving the prerequisite or benefit is not an important factor in this matter.

Individuals Liable for TDS Deposits

An individual who is providing the benefit or prerequisite to a resident is liable for depositing the TDS. The benefit provided by the individual might be wholly in cash or kind. It can also be paid partly as cash and partly in kind. If the part of the benefit paid in cash is not sufficient to meet the liability of TDS, the individual who is providing the benefit must ensure that it is being paid with respect to the benefit. The resident who is receiving the benefit may discharge the tax liability on such benefits. If he discharges the liability through advance tax then he would be able to freely release the benefit without any further deposit of taxes.

Amount of TDS to be deposited

The charge of TDS is made at the rate of 10% of the number of benefits or perquisite. The evaluation of the benefit is a matter of controversy.

There are several social media influencers and marketers who provide marketing services on social media platforms. The companies who are providing their products to these social media marketers are required to deduct and deposit TDS under Section 194R. It is anticipated that with the introduction of Section 194R, the influencers may receive the considerations in a different manner.