Explained: The new tax code for social media influencers - and the trouble with it

The Income Tax Department has introduced a new profession code - 16021, for social media influencers who earn income from promoting products and services online. The classification, reflected in the income tax return (ITR) utilities for financial year 2024–25 (assessment year 2025–26), marks the first time that influencers have been assigned a specific code under the ITR system.

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The change applies to individuals filing under ITR-3 and ITR-4 (Sugam), the forms used by self-employed professionals and those opting for the presumptive taxation scheme. Influencers, along with bloggers, online coaches and other digital gig workers, are required to pay tax on income earned during the financial year and choose the appropriate form depending on their income profile.

Influencers can opt to report income under the presumptive taxation scheme, which allows eligible taxpayers to declare a fixed percentage of gross receipts as taxable income—8 percent (or 6 percent for digital payments) under Section 44AD for businesses, and 50 percent under Section 44ADA for professionals. If this route is chosen, ITR-4 (Sugam) applies, provided turnover does not exceed prescribed thresholds.

The introduction of a professional code for social media influencers has sparked concern among tax experts, who argue that the classification may not align with existing provisions of the Income Tax Act. Under current law, only specified professions notified under Rule 6F fall under the professional category, and social media content creation is not among them. This misalignment could create ambiguity around the applicability of audit thresholds and presumptive taxation schemes under Sections 44ADA, 44AD, and 44AB.

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Experts also point out that many influencers had been using Section 44AD to declare business income and pay tax on a presumptive basis, typically 6 percent of gross receipts, regardless of turnover. The new classification appears aimed at curbing that practice, but since it has been implemented through a backend update without amending the definition of "specified profession," it may lack legal standing and could be subject to court challenges, experts told Moneycontrol.

Tax professionals advise influencers and other taxpayers to start the return filing process by reviewing the Annual Information Statement (AIS) and Form 26AS to ensure reported income and TDS data are accurate. Discrepancies in AIS can be flagged directly on the portal; errors in TDS statements must be corrected by the deductors, such as banks or employers.

While taxpayers are not required to upload proof of deductions, it is advisable to retain supporting documents in case of queries. The tax department now uses analytics and artificial intelligence tools to cross-check returns with third-party data.

Returns must be verified within 30 days of submission, either electronically or by sending a signed copy of Form ITR-V to the Centralized Processing Centre in Bengaluru. Failing to do so renders the filing incomplete.

The new profession code is a step toward greater formalization of the growing digital economy. But for social media influencers, the lack of legal clarity may complicate what should be a simplified compliance measure.

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