YouTube tax: What will be the impact on Indian creators?

YouTuber Shlok Srivastava who has a channel called Tech Burner is not too happy with YouTube’s move of deducting taxes from non-US creators.

Wondering what this new development is? So, if you are an Indian YouTuber who gets views for your content from the US audience, the earnings from those views will be deducted in the form of taxes. The platform will start deducting taxes from June this year and the tax withholding rate on royalties is 15 percent for Indian YouTubers.

"Royalties are a portion of advertising revenue or paid content services on YouTube. So, any earning a creator makes from ad views, YouTube Premium, etc, will fall under royalty," explained Ankit Agarwal, Founder, Do Your Thng, an influencer marketing platform.

"This move will have an impact on every YouTuber. It is not a positive news for any creator," Srivastava told Moneycontrol.

Srivastava added that, for his channel, there won't be any significant impact as most of its audience is from India and only 3-4 percent viewers are from the US.

Even Gautam Madhavan, founder and CEO, MAD Influence, an influencer marketing platform, said that there won't be much impact because “Indian creators don't majorly serve the US audience. Hence, their CPM (cost per mille) is already based on Indian market."

CPM refers to the cost an advertiser pays for 1,000 ad impressions. Ad impressions are counted every time an ad is displayed.

T-Series is the most subscribed YouTube channel, with 176 million subscribers. The top five individual YouTubers from India are as below.

Ajey Nagar aka CarryMinati, who creates comedy content and is also a gamer, is the top individual YouTuber from India, with 29.3 million subscribers. Ashish Chanchlani, who runs a YouTube channel called Ashish Chanchlani vines (comedy and entertainment videos), which has 24 million subscribers, is the second YouTuber.

Then there is Amit Bhadana who also creates comedy videos and has 22.7 million subscribers on YouTube.

The YouTuber who has fourth highest number of subscribers is Technical Guruji, who creates content on technology from unboxing new phones to reviewing new ones, has 20.9 million subscribers.

The fifth is Bhuvan Bam, who runs a channel called BB Ki Vines. He also creates comedy content and has 20.2 million subscribers.

Agarwal shared more details on the impact of this move by YouTube on Indian creators.

"Most of the Indian YouTubers create vernacular content. So, their audience pool is within the country. And YouTube is only taxing revenue that creators generate from US viewers. The minuscule portion of about 15 percent or so of YouTubers who cater to English language may have a tiny audience based out of the US," he said.

"The CPM rates in the US are exorbitant, compared to ours. YouTube CPM in the US is $3.44, while that in India is $0.28, according to Top Dollar (a financial insights hub) report. So, the earning from ads will be sizable. Hence, a 15 percent tax is only a small piece of the pie."

Agarwal also explained the tax brackets for Indian YouTubers. “There are three - 15 percent, 24 percent and 30 percent, based on whether they (Indian creators) submit their tax information or not. Since India and the US have a Double Tax Avoidance Agreement, most creators will have to pay a 15 percent tax on the revenue they earn from American viewers."

Even Neel Gogia, Co-Founder, IPLIX Media, said that nothing changes for Indian YouTubers since majority of the audience are watching the content from rest of the countries apart from USA. "I don't feel it's a huge challenge but we might be able to understand the long term impact of this in the coming months," he said.

Kunal Kishore, co-founder, and chief operating officer, ClanConnect, an influencer marketing platform, said that for a channel like T-Series, even a 15 percent tax would be a big number.

It is important to note that in addition to earnings from views, YouTube will also deduct taxes from YouTube Premium, Super Chat, Super Stickers and Channel Memberships.

For some, the financial impact of YouTube starting to deduct taxes may be less, for others it will be relatively bigger. But, for all, it will be a cumbersome process to declare earnings and file tax information.

"It will be a tedious task. We are running a business, so we have CAs (chartered accountants) but for anyone who is starting out, it will be difficult. For us, it will be easier but it is a task we don't want to do," said Srivastava.

It is not a positive news for any creator 

- Shlok Srivastava

Kishore shared similar sentiments. "For independent creators, it will become a complex process. One will have to start studying the tax process."

Shashi Mathews, Partner, IndusLaw, highlighted a few points that Indian YouTubers will need to keep in mind from now on.

"If the Indian content creator does not fill the tax information in Form W8-BEN [Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)], YouTube will not only deduct tax on the income from US viewership but also from income generated worldwide from YouTube. This deduction could be up to 24 percent if tax information is not given."

Indian YouTubers can claim a credit of the taxes paid in the US while filing taxes in India, he said.

Agarwal who also thinks that filing taxes will be a cumbersome procedure, especially for smaller creators, anticipates another impact of this move. Creators, particularly the smaller ones, may look for new avenues of monetisation -- paths that are not tied to the platform or country."

While for Srivastava, 10-15 percent revenue comes from the platform and the bulk of their earnings are through brand associations, for upcoming YouTubers, a majority of their earnings come from the platform.

But it looks like this could change with creators opting for more brand partnerships or other sources of revenue which doesn't come from the platform.