Livestream Donations and the TDS Gap on Creator Income in India: Why Streamers and Influencers Have No Withholding

Introduction

India’s creator economy has grown into a multi-billion-rupee ecosystem, where gaming streamers attract thousands of viewers, YouTubers monetize every upload, and influencers earn more in a month than many salaried employees do in a year. However, TDS on creator income in India remains a major unresolved issue. While the Income Tax Act, 1961, requires brands and companies to deduct TDS when paying creators, it does not cover the thousands of small monetary transfers from viewers via YouTube Super Chats, Twitch bits, Patreon pledges, or third-party donation links. This creates a system where structured income is taxed at source, but viewer donations bypass withholding entirely, leaving creators to rely on self-reporting — a process that has historically been ineffective in any tax framework.

How Creator Income Is Presently Classified

The starting point for any analysis of creator taxation in India is Section 28 of the Income Tax Act, 1961, which brings income from business or profession within the charge of income tax under the head “Profits and Gains from Business or Profession.” Tax authorities and practitioners alike have consistently treated income from YouTube, Twitch, or any streaming platform as falling under this head when content creation is the creator’s primary occupation. Where content creation is ancillary, income may be classified under “Income from Other Sources” under Section 56. In either case, the income is taxable at applicable slab rates. For the assessment year 2024-25, the Income Tax Department formalised this by introducing Profession Code 6023 for “Content Creators” in ITR-3, and a distinct code for social media influencers thereafter, effectively acknowledging that content creation is a recognised income-generating activity within the formal tax architecture [1].

Structured revenue streams — including AdSense earnings, sponsorships, brand collaborations, and merchandise sales — come from identifiable payers who can deduct TDS. GST obligations also apply: under the Goods and Services Tax Act, 2017, services by YouTubers, streamers, and influencers are classified as Online Information and Database Access or Retrieval Services (OIDAR). GST at 18% applies once annual turnover exceeds ₹20 lakh (₹10 lakh in special category states), and creators serving clients across states must register regardless of turnover. However, a critical gap remains: TDS on creator income is consistently applied only to payments from identifiable corporate payers, leaving viewer donations and small transfers outside the withholding framework. [2].

The TDS Framework That Does Apply — And Its Gaps

The TDS architecture that currently governs creator payments rests on three provisions: Sections 194J, 194C, and 194R. Section 194J mandates a 10% TDS on fees for professional services, which would cover a brand’s payment to an influencer for a sponsored integration. Section 194C covers payments under contracts, applicable to project-specific arrangements at 1%. These two sections operate cleanly when the payer is an identifiable Indian corporate or individual deductor above the turnover threshold.

Section 194R, inserted by the Finance Act, 2022, and effective from July 1, 2022, takes the analysis further. It mandates that “any person responsible for providing to a resident, any benefit or perquisite, whether convertible into money or not, arising from carrying out of any business or exercise of any profession by such resident, shall, before providing such benefit or perquisite… deduct an amount equal to ten per cent of the value or aggregate of value of such benefit or perquisite.” The threshold is ₹20,000 in aggregate per year. The Central Board of Direct Taxes (CBDT) issued Circular No. 12 of 2022 dated June 16, 2022, to clarify its application, confirming that TDS under Section 194R is required regardless of whether the benefit is taxable in the hands of the recipient, that valuation is at fair market value or purchase price, and crucially, that products given to social media influencers for review are subject to TDS if the influencer retains the product [3]. This was a significant development: it plugged a specific gap concerning in-kind benefits but left the question of viewer-directed cash donations entirely unaddressed.

The carve-out within Section 194R itself is telling. The provision does not apply to an individual or Hindu Undivided Family whose total sales, gross receipts, or turnover does not exceed ₹1 crore in business or ₹50 lakh in profession in the preceding financial year. This means individual viewers — the very people clicking “Super Chat” or sending ₹500 through a donation link — are entirely outside the deduction obligation [4]. No viewer is a “person responsible for providing benefit” in any organised commercial sense. There is no payer-side obligation, and no platform has been mandated by any CBDT circular or statutory provision to withhold tax on these micro-transactions before remitting them to the creator.

The Structural Void: Viewer Donations and the Absence of a Deductor

This is the heart of the problem. Tax deduction at source is a withholding mechanism that requires a legally identifiable deductor — the entity making the payment — to deduct and deposit tax to the government on behalf of the payee. In conventional professional transactions, this works because the payer is typically a company or a firm with tax compliance obligations. When a viewer sends a donation during a livestream, the payer is an individual who almost certainly falls below any threshold, has no compliance obligation to deduct TDS, and is not structured as a business in the relevant sense. Individually, these donations may be small — ₹50, ₹200, ₹1,000. Cumulatively, they can amount to lakhs of rupees over a financial year for popular streamers.

The Income Tax Act’s gift tax provisions under Section 56(2)(x), which were broadened significantly through the Finance Act, 2017, impose tax in the hands of the recipient when any sum of money exceeding ₹50,000 in aggregate is received from persons who are not “relatives” as defined under the Explanation to Section 56(2). The logic is clear: gifts from strangers that are beyond the ₹50,000 threshold become taxable income for the recipient. Viewer donations, by their very nature, come from strangers. The creator and the viewer have no familial relationship. If the aggregate value of donations received during a financial year crosses ₹50,000, they are taxable in the hands of the creator [5]. However — and this is the crux — there is no withholding mechanism. The obligation to report and pay falls entirely on the creator at the time of filing the Income Tax Return. Section 56(2)(x) has no corresponding TDS provision for this specific scenario.

This creates a significant self-reporting burden in an economy where informal income is historically underreported. Unlike AdSense payments, which pass through banking channels and are visible in Form 26AS or the Annual Information Statement (AIS), donations via Twitch, Kick, or third-party tools like StreamLabs are not systematically captured by the tax system, leaving TDS on creator income in India largely unenforced for these micro-transactions.

Judicial Observations and the “Business Income” Characterization

While no Indian court has directly adjudicated on the tax treatment of streaming donations, the broader jurisprudence on business income and gifts received in the course of carrying on a profession is instructive. The Supreme Court in CIT v. Mahindra & Mahindra Ltd. [1983] 144 ITR 225 (SC) held that a benefit received in kind in the course of business falls within the ambit of Section 28(iv) — income from business or profession — when it arises from the business relationship. This principle is directly relevant: if viewer donations are understood as arising from the act of streaming — which is the creator’s profession — they arguably fall within Section 28 rather than remaining purely within the gift framework of Section 56(2)(x). The Finance Act, 2022’s Explanatory Memorandum itself cited Mahindra & Mahindra when justifying the introduction of Section 194R, which confirms that the legislature acknowledged the Section 28(iv) pathway. Interestingly, the CBDT’s own Circular No. 12/2022 expanded the scope beyond Section 28(iv) to cover all benefits irrespective of taxability, arguably going further than the statute’s intent as understood from that judgment [3].

The Income Tax Appellate Tribunal in Helios Food Improvers (P.) Ltd. v. Dy. CIT [2007] 14 SOT 546 (Mum.) examined the meaning of “perquisite” broadly. Though this was not a streaming case, it established that the term “perquisite” has wide connotation in the context of business benefits. Applying this reasoning to streaming donations, one could argue that a viewer’s donation is a perquisite received in the course of the creator’s profession. This interpretation supports taxability but, again, says nothing about withholding.

GST and OIDAR: A Separate but Equally Fragmented Piece

On the indirect tax side, the classification of streaming and content creation services as OIDAR under the GST framework creates its own set of complications. Domestic streaming platforms facilitating viewer donations arguably have no obligation to collect GST on those donations unless the transaction is framed as a “service” by the creator to the viewer. In most cases, viewer donations are voluntary and do not correspond to a specific service delivery, which weakens the argument that GST is owed. However, when platforms charge subscription fees — such as YouTube Memberships or Twitch subscriptions — those are GST-applicable transactions.

Following the October 2023 amendment to the OIDAR definition under GST, the scope was expanded by removing restrictive conditions such as “minimal human intervention” and “services used for any purpose other than commerce or industry.” The Directorate General of GST Intelligence (DGGI) has since 2024 pushed for greater registration compliance by foreign platforms operating in India, noting that GST collected from OIDAR services rose from ₹80 crore in 2017-18 to ₹2,675 crore in 2023-24 [6]. But even an expanded GST net does not resolve the income tax withholding question on donations.

What Reform Would Look Like

The gap in the withholding framework for TDS on creator income in India is legislative, not judicial, and requires a clear policy fix. There are broadly three approaches worth considering. First, platforms themselves could be designated as “responsible persons” for TDS purposes — much as banks are responsible for deducting TDS on fixed deposit interest under Section 194A. A new provision analogous to Section 194A could require platforms to deduct 10% on cumulative creator earnings from viewer donations once they cross a threshold, say ₹50,000, in a financial year. This would shift the compliance burden from creators (who may not have the systems to track it) to platforms (who have the data). Second, the Annual Information Statement (AIS) framework could be expanded to require mandatory reporting by platforms of all creator earnings — donations included — even where no TDS is deducted. This would improve the tax department’s audit trail without requiring new TDS infrastructure. Third, the CBDT could issue a clarificatory circular applying Section 194R logic to platform-level disbursements of donations, treating the platform as the entity “providing the benefit” when it aggregates and remits viewer donations to creators.

The CBDT has previously shown willingness to use circular power to expand the practical reach of TDS provisions. Its track record with Section 194R Circular No. 12 of 2022 demonstrates that guidelines can be binding on income tax authorities and on “the person providing any such benefit,” which opens a textual pathway to designating platforms as deductors for donation flows [3][4].

The Self-Assessment Trap

Until any such reform materialises, creators bear the full self-assessment burden. A gaming streamer earning ₹8 lakh from AdSense (TDS deducted), ₹3 lakh from brand deals (TDS deducted under Section 194J), and ₹4 lakh from viewer donations (no TDS) receives very different treatment for tax purposes depending purely on the source. The first two are mirrored in Form 26AS, cross-referenced during ITR processing, and difficult to under-report. The third is invisible to the department unless the creator proactively discloses it. The legal obligation to disclose exists — Section 56(2)(x) and/or Section 28 apply — but the enforcement mechanism does not.

Advance tax obligations compound this. If aggregate tax liability exceeds ₹10,000 in a year, Section 208 requires quarterly advance tax payments. A creator who does not account for donation income may find themselves liable for interest under Sections 234B and 234C for failure to pay advance tax on time, in addition to the underlying tax [2]. These are quiet financial risks that creators, many of whom operate informally without chartered accountants, do not anticipate.

Conclusion

India’s TDS framework for the creator economy is structurally incomplete. While TDS is properly deducted, deposited, and reflected in tax records when there is an identifiable corporate payer, the system fails when the “payer” is a diffuse community of individual viewers sending voluntary donations through digital platforms. Sections 194R and 56(2)(x) partially address brand perquisites and recipient liability, but neither establishes a withholding mechanism at the point of payment. This gap leaves creators responsible for self-reporting donations, creating compliance risks. Until Parliament or the CBDT implements reforms — such as designating platforms as deductors, expanding AIS reporting, or introducing a new TDS provision for digital donation income — TDS on creator income in India will remain inconsistent, not due to tax evasion, but because the collection framework was never designed for the realities of the creator economy.

References

[1] Central Board of Direct Taxes, New ITR Code for Social Media Influencers, Taxscan (July 2025): https://www.taxscan.in/top-stories/cbdt-introduces-new-itr-code-for-social-media-influencers-sparking-debate-among-tax-experts-1428531

[2] Tax2Win, Taxation Rules for YouTubers & Influencers in India (2025): https://tax2win.in/guide/taxation-youtubers-social-media-influencers

[3] Lakshmikumaran & Sridharan Attorneys, TDS on Perquisites and Benefits — CBDT Issues Guidelines on New Section 194R (June 2022): https://www.lakshmisri.com/newsroom/news-briefings/tds-on-perquisites-and-benefits-cbdt-issues-guidelines-on-new-section-194r/

[4] TaxGuru, Assessment of CBDT Circular on Section 194R TDS on Benefits or Perquisites: https://taxguru.in/income-tax/assessment-cbdt-circular-section-194r-tds-benefits-perquisites.html

[5] ClearTax, Section 56 of the Income Tax Act: https://cleartax.in/s/section-56-of-the-income-tax-act

[6] A2Z Taxcorp, India Eyes New GST Revenue Stream from Burgeoning Digital Services Market (May 2025): https://a2ztaxcorp.net/india-eyes-new-gst-revenue-stream-from-burgeoning-digital-services-market/

[7] CAClubIndia, GST for Social Media Influencers: https://www.caclubindia.com/articles/gst-for-social-media-influencers-47058.asp

[8] TaxGuru, Tax Laws for YouTubers and Streamers in India (February 2024): https://taxguru.in/income-tax/tax-laws-youtubers-streamers-india-guide.html

[9] CAClubIndia, New Code for Social Media Influencers in ITR-3 — Is Content Creation Now a Profession? (July 2025): https://www.caclubindia.com/articles/new-code-for-social-media-influencers-in-itr3-is-content-creation-now-a-profession-53834.asp

[10] KPMG India, CBDT Releases Guidelines to Remove Difficulties for Deduction of Tax under Section 194R (2022): https://www.in.kpmg.com/taxflashnews/KPMG-Flash-News-CBDT-Guidelines-Section-194R.pdf