Answer

Digital economy · Creator

Free products as income: when gifted merchandise becomes taxable

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  1. Facts

    When a brand sends you a free product for review, a phone, a watch, a beauty product, the fair market value of that product is taxable as business income if you keep it after the review. CBDT clarified this in 2020.

  2. Provisions and law

    • IT Act, Sec 26 (old 28) | CBDT Circular 12/2020 (influencer perquisites)

  3. Analysis

    Specifically: Free samples retained after promotion = taxable perquisite. The brand is required to add this to your perquisite income and deduct TDS at 10%. Exception: If the product is returned to the brand after the review, it is not taxable, it was a loan. Many influencers have arrangements with brands to return high-value items (phones, laptops) after reviews specifically to avoid this tax. Practical impact: An influencer who gets ₹5L worth of products per year for reviews has ₹5L of taxable income, even if no cash changed hands.

  4. Conclusion

    Talk to a Savvy for the exact next step on your case.

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