IT Dept scrutinizes social media to curb tax evasion, notices sent to 15 influencers

In a significant development, the Income Tax Department has widened its investigation techniques beyond traditional financials and has now turned its attention to social media posts. Using them as potential indicators of tax evasion. Notably, the department has sent notices to 16 prominent social media influencers who flaunted their luxury shopping sprees and extravagant overseas vacations while paying little or no income tax.

The move by the Income Tax Department demonstrates its increasing reliance on data analytics to identify discrepancies between individuals’ social status and their reported income. The department is utilizing these analytical tools to determine whether social media influencers are underreporting their earnings, marking a significant step towards promoting income tax compliance among high-earning individuals.

The notices sent to the 15 influencers encompass a diverse range of fields, including Bollywood, fashion, lifestyle, and travel, among others. In their correspondence, the Income Tax Department has requested clarification regarding the sources of income tax and the reasons behind their minimal tax payments.

These actions by the tax authorities come in response to an apparent rise in tax evasion among social media influencers, particularly in cases where their social media presence suggests a lifestyle incompatible with their reported income. The department’s scrutiny extends beyond financial records to encompass a careful examination of the influencers’ social media accounts.

The Income Tax Department has urged the identified influencers to disclose details of income generated through sponsored content, brand endorsements, and other sources. Additionally, they have requested information about expenditures related to travel, clothing, accommodation, and other relevant expenses.

To ensure better compliance among social media influencers, the Income Tax Department has introduced new rules that specifically target this group. These rules are designed to prevent income tax evasion and provide clear guidelines for influencers to follow. Here are the key aspects of the new tax regulations:

1. Applicability: The income tax rules apply to all social media influencers earning more than ₹2 lakhs in a single financial year.
2. Tax Rate: Social media influencers are subject to a fixed income tax rate of 30% on their gross income.
3. Tax Deductions: Influencers can claim tax deductions on expenses such as equipment purchases and travel.
4. Effective Date: These new income tax rules for social media influencers have been in effect since April 1, 2023.

The implementation of these regulations aims to foster greater income tax compliance among high-earning individuals who may have previously evaded their tax obligations.