The Income Tax (IT) Department has introduced five new professional codes in the IT Return Form-3 (ITR3), giving recognition to social media influencers, speculative traders, commission agents, future and options traders as professions. As per officials, this step has been taken as a part of the department’s efforts to acknowledge the evolving nature of professions in this digital age .
One of the senior officials told Economic Times, "This year, we have added five new codes for professions and will continue to add more to bring them within the formal economy.”
As per tax officials, the number of influencers with a gross annual income more than ₹20 lakh has risen sharply over the last two years. In some cases, the annual income was also more than ₹2-5 crore, higher than many professionals in other sectors. In some instances, their net worth also crossed ₹100 crore.
He further said that many of these influencers were brought under the tax scanner as they were either not filing returns or were filling wrong returns. "By assigning them proper professional code, they will be able to file returns correctly, and this will also help the field formations as they would know which bracket they would fall into," he added.
As of now, many social media influencers were filing returns as either business income or by choosing the "Other" code.
According to tax experts, the latest change by the IT department will help bring forth greater accuracy in income reporting and compliance, thereby helping with a more organised tax collection process.
Speaking to ET on this matter, Amit Maheshwari, tax partner at tax and consulting firm AKM Global said, "With the ever-evolving business landscape, it is of utmost importance to enact separate codes for emerging business.” He further pointed out that it brings more clarity for taxpayers in choosing the right category while filing returns, especially for emerging business and specialised services that were earlier forced to choose mismatched codes.
This move will not only help align income disclosure with the type of profession or business activity but will also assist them in improving data analytics capabilities of the department, enhance compliance monitoring and most importantly reduce misreporting.
