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Are you a social media influencer or doctor?  Here’s how the new Tds rules will affect you


Masoom Minawala is a social influencer with 1.2 million followers on Instagram. As part of her job, she receives several products from brands for promotions, but some of them stay with her. Doctors also keep certain medical samples shared by pharmaceutical companies.

These “gifts” will now be taxed from July 1 under new TDS guidelines issued by the Central Commission for Direct Taxation (CBDT). Social media influencers are now looking for verified accounts to help them with the same.

Anuradha K Bhandari and Ashutosh Bhandari, who run an Instagram page, Thegoofyones, told CNBC-TV18: “Now we will have to understand this taxation process regarding the 10% deduction when we are collaborating with a small business or businesses. “

Minawala told CNBC-TV18 that most giveaways come from smaller brands that recognize their product may or may not be featured. “But with additional TDS coming out of their pockets, they will have to rethink the giveaways,” Minawala said, adding that they were looking for help with clarity.

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What do the new rules say?

The provision introduced in the Finance Act 2022 as Section 194R imposes a 10% withholding tax (TDS), excluding surcharge and surcharge, on gifts exceeding Rs 20,000 in a year that influencers and physicians receive and retain sales promotions.

“Influencers and doctors will now have to file a tax return in advance if the value of gifts they receive exceeds Rs 20,000 in one year,” said Shubham Sharma, founder of legal consultancy SRS Associates.

The guidelines provide examples of gifts where tax will be deducted under section 194R. These include incentives in the form of money, TV, car, computers (or any other gadget), outfits, cosmetics, gold coins, jewelry, sponsored trips, free tickets to events and free drug samples given to a doctor.

How will the authorities plug the tax leaks?

According to Ashish Sodhani, Head, International Tax and Litigation Advisory at law firm Nishith Desai Associates, any such expense a company incurs should be accounted for on its books.

“It would help the tax authorities determine what was shared,” Sodhani told CNBC-TV18. “Whether or not they (influencers/doctors) can be raided is a subjective matter and may depend on other factors. However, careful scrutiny based on information received from the companies providing the benefits can certainly be part of the process.”

According to Sodhani, a process with proper documentation could be implemented between companies and doctors/influencers, which would serve as proof that gits and benefits have been kept or not.

Could companies reporting such giveaways be subject to further investigation? Sodhani said: “Section 194R was included in the Income Tax Act due to non-reporting of taxable transactions under section 28(iv). Therefore, reporting would only be a beneficial step for businesses to reduce the scrutiny that would otherwise take place.”

What’s in it for social media influencers?

According to the CBDT, whether the product offered for promotion is beneficial or incidental will depend on the facts of the case. “In the case of a benefit or precondition, a product is a car, mobile, outfit, cosmetics, etc., and if the product is returned after being used for the purpose of rendering a service, it will not be not treated as a benefit or a prerequisite,” CBDT said.

In influencer marketing, a barter system whereby brands offer free samples or giveaways to influencers in exchange for posting on social media is very common. According to Sharma, these freebies, due to negligible paperwork, are usually not mentioned by influencers and also doctors when filing tax returns.

“The barter system is an easy method for brands to save (on marketing costs) and for small creators to grow. Technically, an influencer provides a service to the brand. therefore, new provisions have been added,” Sharma said.

The Bhandaris believe that due to a lack of clarity around the topic, aspiring influencers might “steer clear of barter collaborations”. Minawala also expressed similar concerns.

“For small brands that can’t afford to invest in influencer marketing, giving away is a safe bet. I meet many small brands and introduce them even if it’s just a barter opportunity because my goal is to showcase their craft and shine a light on the With additional TDS, it may not be financially feasible for startups to collaborate, even on a barter basis, and small businesses will be at a loss,” Minawala said.

Meanwhile, Swati Sharma, founder of consulting firm F Square Media, says the move will be good for long-term influencers. “The barter system is a flawed concept and a lot of freebies are wasted. Influencers will now think twice before indulging in bartering and may even demand the payment they deserve for their work with brands,” he said. she declared.

What do the new rules mean for doctors?

For doctors, CBDT clarified that Section 194R would apply to the distribution of free samples to a hospital when doctors receive free samples while working there. Such samples may be regarded as taxable benefits for employees by the hospital, and thus tax may be deducted under Section 192. In such a case, the threshold of Rs 20,000 should be considered against in the hospital, in accordance with the standards.
“As certain items are provided to doctors in accordance with the code of ethics of the Medical Council of India and the recent decision of Apex Laboratories, the company would take a deduction for the same from its books which would be the basis of the CBDT to determine what was shared with the doctors,” Sodhani said.

In the case of items other than these, it cannot be considered an inference and CBDT may not be able to verify prima facie what was shared, according to Sodhani.

He explained that a stricter code of ethics is currently being discussed within the National Medical Commission and that a draft has already been published. “Thus, companies may need to review what is permitted under the revised code of ethics read with Apex Laboratories’ ruling, in order to qualify for deductions on its books,” Sodhani said.

As these new rules come into effect from July 1 despite the gray areas, influencers and doctors will need to be careful before accepting free gifts and should report appropriately in case they don’t want to turn into tax cheats. .

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