Over-the-top (OTT) and streaming businesses operating in India face a complex tax compliance landscape, particularly with respect to Tax Deduction at Source (TDS) provisions. The Income-tax Act, 2025 contains specific TDS provisions that apply to digital platforms, with significant implications for OTT and streaming businesses.
The Statutory Framework for TDS on Digital Platforms
Section 393(1) — TDS on Payments to Residents
Section 393(1) of the Income-tax Act, 2025 provides for TDS on various payments to residents, including payments to contractors, fees for professional and technical services, and payments on transfer of virtual digital assets. The provisions apply to OTT and streaming businesses making payments to content creators, artists, technicians, and service providers.
Section 393(2) — TDS on Payments to Non-Residents
Section 393(2) provides for TDS on payments to non-residents, including interest, royalty, fees for technical services, and other sums. OTT and streaming businesses making payments to foreign content owners, technology providers, and service providers must comply with these provisions.
Royalty Payments
Royalty payments made by OTT and streaming platforms for content licensing are subject to TDS. The government has been focusing on tightening the reins on royalty payments which are going untaxed, with a focus on OTT platforms. This increased scrutiny means that OTT and streaming businesses must ensure proper TDS compliance on all royalty payments.
TDS Provisions Relevant to OTT and Streaming Businesses
TDS on Payments to Content Creators
OTT and streaming platforms make payments to content creators, artists, writers, directors, and technicians. These payments may be subject to TDS under Section 393(1) (Table: Sl. No. 6) as fees for professional services or payments to contractors.
TDS on Royalty Payments
Royalty payments made to content owners, music labels, and production houses are subject to TDS. The rate of TDS depends on the nature of the payment and the status of the recipient. Payments to residents are subject to TDS at the rates specified in Section 393(1), while payments to non-residents are subject to TDS under Section 393(2).
TDS on Advertising Revenue
OTT and streaming platforms generate advertising revenue and may make payments to advertising agencies, influencers, and content creators. These payments may be subject to TDS under the applicable provisions.
TDS on Subscription Revenue
Subscription revenue collected by OTT and streaming platforms may involve TDS on payments made to content providers, technology providers, and service providers.
Compliance Requirements
Deduction of Tax
The person responsible for paying any sum chargeable under the Act shall deduct tax at the time of credit of such sum to the account of the payee or at the time of its payment, whichever is earlier. The tax shall be deducted at the rate specified in the Act or the applicable tax treaty.
Deposit of Tax
The tax deducted shall be deposited with the Central Government within the prescribed time. For payments made in the month of March, the tax shall be deposited on or before 30th April. For payments made in other months, the tax shall be deposited on or before seven days from the end of the month.
Filing of TDS Returns
The deductor shall file TDS returns in the prescribed form and within the prescribed time. The returns must contain complete and correct information of all deductions made.
Issuance of TDS Certificates
The deductor shall issue TDS certificates to the deductee in the prescribed form and within the prescribed time. The certificate must specify the amount of tax deducted, the rate at which tax was deducted, and other particulars.
Regulatory and Legal Challenges
Regulatory Framework
OTT platforms have been operating in a "legal and regulatory void". The Telecom Disputes Settlement and Appellate Tribunal (TDSAT) has previously ruled that OTT platforms fall under the Information Technology Rules, 2021, and not TRAI, as they don't need central government licenses. This regulatory uncertainty extends to tax compliance as well.
Jurisdictional Issues
The jurisdiction over OTT platforms for tax purposes may be disputed. TDSAT has ruled that TRAI does not regulate OTT content, and therefore TDSAT may itself lack jurisdiction to hear certain cases. OTT platforms are operating without a clear regulatory framework, allowing them to expand into traditional broadcasting territory without the compliance burden that cable and satellite operators must carry.
GST and TDS
The Media and Entertainment industry has flagged GST, TDS, and ITC roadblocks, seeking structural tax reforms. One of the most significant demands is a reduction in GST on television and OTT subscriptions from 18% to 5%.
Practical Implications for OTT and Streaming Businesses
Content Licensing
OTT and streaming businesses must ensure TDS compliance on all content licensing payments. This includes payments to content owners, production houses, and individual creators.
International Payments
Payments to foreign content owners and technology providers are subject to TDS under Section 393(2). The rate of TDS may be reduced under applicable tax treaties, subject to compliance with treaty provisions.
Technology Payments
Payments for technology services, including streaming technology, platform maintenance, and content delivery, may be subject to TDS.
Advertising and Marketing
Payments for advertising and marketing services may be subject to TDS. This includes payments to advertising agencies, influencers, and content creators.
Best Practices for OTT and Streaming Businesses
OTT and streaming businesses should implement robust TDS compliance systems to ensure timely deduction, deposit, and reporting of tax. The business should maintain proper records of all payments made and TDS deducted.
The business should obtain Tax Deduction and Collection Account Number (TAN) and ensure that all TDS certificates are issued within the prescribed time. TDS returns should be filed accurately and within the prescribed time.
The business should ensure proper classification of payments for TDS purposes. Payments to content creators may be classified as fees for professional services or payments to contractors. The business should also ensure compliance with tax treaty provisions for international payments.
Regular review of TDS compliance should be conducted, and any issues should be addressed promptly. The business should also stay updated on changes in TDS rates and provisions.
Disclaimer: This article provides general information and does not constitute legal advice. For specific guidance on digital platform TDS rules for OTT and streaming businesses, please consult qualified legal and tax professionals.
Need Expert Legal Guidance?
Navigating the complex TDS framework for OTT and streaming businesses requires experienced legal counsel. At Anuj Desai & Associates, we provide comprehensive advisory services on TDS compliance, tax planning, and regulatory matters for digital platforms. Contact us for expert guidance on your OTT and streaming business TDS matters.