The Income Tax Department has rolled out a new tax code, 16021, specifically for you under the ‘Profession’ category for FY 2024-25 (AY 2025-26). This is a game-changer for how you report your earnings from promotions, endorsements, and digital content.
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Until now, income for social media influencers didn’t have a dedicated classification. Now, with code 16021, your income is officially recognized as professional income. This move aims to make tax compliance smoother for everyone in the creator economy, from online coaches to bloggers and gig workers. This new code is active in both ITR-3 and ITR-4 (Sugam) forms.
Choosing the Right ITR Form: ITR-3 vs. ITR-4
Picking the correct ITR form is crucial to avoid errors or notices. Here’s a quick guide:
- ITR-3: The “Master Form”
- This form is for individuals and Hindu Undivided Families (HUFs) earning income from a business or profession who don’t opt for the presumptive taxation scheme.
- If you have various income sources (salary, house property, capital gains, etc.) and want to maintain detailed books of accounts to claim all your actual expenses, ITR-3 is likely your choice.
- ITR-4 (Sugam): For Presumptive Taxation
- ITR-4 is designed for individuals, HUFs, and partnership firms (resident in India) who choose the presumptive taxation scheme under Sections 44AD or 44ADA.
- This scheme simplifies things by allowing you to declare a fixed percentage of your income as profit, letting you skip maintaining detailed books of accounts.
- Section 44ADA (Professionals): If your gross receipts are up to ₹50 lakh (or ₹75 lakh if cash receipts are under 5%), you can declare 50% of your gross receipts as professional income.
- Section 44AD (Businesses): For business income, you can declare 8% (or 6% for digital payments) of your gross receipts as profit if your income is up to ₹2 crore (or ₹3 crore if cash receipts are under 5%).
The Current Confusion and What to Watch For
Here’s a snag: While the new code 16021 falls under ‘profession,’ content creation isn’t yet listed as a “specified profession” under Rule 6F. This creates some uncertainty about whether influencers should use Section 44AD (business presumptive taxation) or Section 44ADA (professional presumptive taxation).
A clarification from the Income Tax Department is awaited, so keep an eye out for updates! Until then, if you’ve been using 44AD, you might continue to do so, especially if your expenses are significant.
Essential Tips Before You File
- Check Your AIS and Form 26AS: Always cross-reference your Annual Information Statement (AIS) and Form 26AS on the income tax portal. Make sure all your income, TDS, and deductions match official records, and report any mismatches.
- Keep Documents Handy: You won’t need to upload proof when filing, but it’s smart to keep all your financial documents organized in case of future scrutiny.
- Be Honest with Deductions: AI-backed systems are getting smarter! Avoid inflating or claiming fake deductions, as inconsistencies can be flagged quickly.
- Verify Your Return: This is non-negotiable! You must verify your ITR within 30 days of filing, either online or by mailing the signed ITR-V to CPC Bengaluru. Your return won’t be processed otherwise.
Whether you’re a full-time influencer or a side-hustler, understanding these changes is key. This new tax code is just the beginning of a more structured tax landscape for India’s booming creator economy.
Got any questions about these changes? Let us know!
