The digital economy has experienced rapid growth over the past few years, leading to the emergence of a new class of business entities: online sellers and influencers. These businesses, though primarily operating in the virtual space, are subject to specific tax regulations that have evolved with the times. With the Union Budget of FY 2025 introducing new tax rules, online sellers and influencers must stay updated to ensure compliance and avoid any legal complications. Below, we delve into the key tax provisions that businesses in this sector must be aware of in the coming financial year.
Changes in GST Applicability for Online Sellers
The Goods and Services Tax (GST) regime has seen significant changes with respect to e-commerce operators. In FY 2025, online sellers who operate through e-commerce platforms must ensure that they are properly registered under GST if their aggregate turnover exceeds the prescribed threshold. E-commerce operators will now be required to collect tax at source (TCS) on behalf of the sellers on their platforms. The rate of TCS varies based on the nature of the goods or services being sold. This means that sellers will need to account for the GST already collected by the e-commerce platform and ensure that their filings reflect this amount correctly.
Businesses must also be cautious about the scope of their supplies, as the GST applies not only to goods but also to services provided through digital platforms. Online sellers should maintain detailed records of their transactions to ensure that the right amount of GST is paid on their sales, avoiding any penalties or interest due to underreporting.
Taxation of Influencer Income
The income earned by influencers through brand collaborations, sponsored content, and affiliate marketing is now clearly defined under the Income Tax Act. Influencers are required to disclose their income from these activities in their annual tax returns. Under the new provisions, the income earned from digital platforms is subject to tax at applicable income tax rates, which depend on the individual’s total income. Influencers must also ensure that they account for any TDS (Tax Deducted at Source) that may have been deducted by the brand or agency they are collaborating with.
Influencers who earn income exceeding ₹2.5 lakh annually will be required to file a tax return, and they must keep track of their earnings, ensuring that proper deductions are applied to reduce taxable income, such as expenses related to content creation and digital marketing.
Deduction of Expenses for Online Businesses
Both online sellers and influencers can claim various deductions related to business expenses. For online sellers, these deductions may include the cost of goods sold, shipping expenses, e-commerce platform fees, and marketing costs. Similarly, influencers can claim deductions for expenses incurred during content creation, such as equipment purchases, travel expenses, and professional services.
To ensure smooth compliance, businesses should maintain proper documentation and receipts for all business-related expenses. These deductions will reduce taxable income, potentially lowering the overall tax liability.
TDS Implications for Payments to Influencers
With the rise of influencer marketing, businesses must understand the implications of Tax Deducted at Source (TDS) for payments made to influencers. As per the provisions in FY 2025, businesses or individuals paying influencers for services provided must deduct TDS at the applicable rate. This is a key change, as many businesses often overlook this requirement, leading to potential tax issues.
Influencers who receive payments must ensure that they have the correct documentation to claim the TDS credit while filing their tax returns. Any discrepancies between the amount of TDS deducted and the actual income reported could lead to penalties.
Importance of Accurate Reporting and Record-Keeping
As the tax rules for online businesses evolve, it becomes increasingly important for online sellers and influencers to maintain accurate records of their transactions, including receipts, contracts, and proof of payment. Good record-keeping practices not only ensure smooth tax filing but also help in the event of an audit by tax authorities. Businesses should invest in accounting software or hire professionals to ensure compliance with the latest tax provisions.
Conclusion
The new tax rules for online sellers and influencers in FY 2025 highlight the government’s growing focus on the digital economy. While the regulations provide clarity on how these businesses should manage their tax obligations, it also requires proactive compliance from online sellers and influencers. By staying informed and adopting best practices in tax reporting and record-keeping, businesses can navigate the complex tax landscape and avoid legal challenges in the future. It is advisable for businesses in this sector to consult with tax professionals to ensure they fully understand and comply with the latest tax rules.
