Union Budget 2026: Will the government back the Orange Economy?

India is home to nearly 2–2.5 million active digital creators today, collectively influencing more than $350 billion in annual consumer spending. This figure is projected to exceed $1 trillion by 2030. Direct revenues generated by the creator ecosystem currently stand at $20–25 billion and are expected to grow to nearly $125 billion by the end of the decade. Yet, despite this scale, monetisation remains uneven, with only a small fraction of creators earning a stable income.

A key step towards formalisation came last year, when the Income Tax Department recognised social media influencers as a distinct professional category for the first time. A new profession code (16021) was introduced to cover individuals earning income through the online promotion of products and services.

The code has been incorporated into the ITR utilities for FY 2024–25 (assessment year 2025–26). Influencers are required to use this code when filing returns under ITR-3 or ITR-4 (Sugam), both of which apply to self-employed individuals and small businesses. The move signals a clear recognition of influencer marketing as a mainstream economic activity, bringing creators more firmly into the formal tax net.

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Support For the Creator Economy

Gautam Madhavan, CEO of Mad Influence, said this evolution makes government recognition even more critical. “For the upcoming Union Budget 2026, we expect the government to formally recognise and support the creator economy as a strategic growth sector through clarified GST treatment for digital content services, tax incentives for content-to-commerce monetisation models, and social security frameworks for gig creators that bring stability to this dynamic workforce,” he said.

Madhavan noted that creator-led commerce and community-driven content already influence up to 30% of purchase decisions in certain categories. “India’s creator economy is now a major force shaping digital consumption and market behaviour. Direct ecosystem revenues are expected to grow from $20–25 billion today to $100–125 billion by the end of the decade, underlining the massive economic opportunity ahead,” he added.

Despite this influence, only around 8–10% of creators monetise effectively. Industry leaders say this highlights the need for policy action that goes beyond tax clarity. Access to credit, simplified compliance for small creator-led businesses, and inclusion in social security frameworks are emerging as key demands ahead of the Budget.

“Only about 8–10% of creators monetise effectively today, highlighting a huge opportunity for policy action to unlock broader participation and sustainable livelihoods,” Madhavan said, adding that integrating creators into formal systems could help millions convert influence into long-term economic participation rather than short-term brand deals.

Calls for simpler TDS norms

As influencers and digital businesses navigate compliance, industry bodies have renewed calls for simplifying the tax deduction at source (TDS) framework. According to FICCI, the government should outline a clear roadmap for rationalising TDS rates to improve ease of doing business. The Finance (No. 2) Act, 2024—which reduced TDS rates on several payments from 5% to 2%—is being viewed as a positive first step.

FICCI has suggested streamlining TDS into three broad categories: TDS on salary at applicable slab rates, TDS on lotteries and online games at the maximum marginal rate, and two standard TDS rates for other payments. It has also proposed exempting B2B transactions subject to GST from TDS, arguing that such transactions are already tracked through Form 26AS and the Annual Information Statement.

According to the industry body, low-rate TDS or TCS on the purchase and sale of goods—currently levied at 0.1%—adds to compliance costs without yielding significant revenue. It has further recommended a negative list of payments that should not attract TDS, including payments to senior citizens, farmers, banks and financial institutions, and purchases from GST-registered entities where GST has been paid.

Meanwhile, marketers are shifting away from high-volume influencer campaigns towards outcome-driven strategies. Brand leaders are increasingly demanding transparency, audience authenticity and measurable returns on spend. This shift has fuelled the rise of AI-driven influencer intelligence platforms that help brands identify the right creators, weed out inflated metrics, and link content directly to business outcomes.

Read On: Will 2026 formalise the creator economy?

Global cues and the US ‘no tax on tips’ policy

Globally, tax treatment of creator income is also evolving. In the US, a new provision under the US Act introduces a “no tax on tips” policy for workers who customarily receive tips. Eligible taxpayers can deduct tipped income within specified limits, potentially altering income structures across professions.

Kalyan Kumar, CEO of KlugKlug, believes India can draw lessons from developed markets such as the US and UAE. “As we approach Union Budget 2026, we expect targeted policy support that enables the creator economy to mature into a structured, scalable digital industry. Clear taxation norms, incentives for creator-tech platforms, and easier compliance for creator-led enterprises can accelerate sustainable monetisation and formalisation,” he said.

Kumar pointed out that while India has over 100 million creators overall, effective monetisation remains concentrated among a limited few. “Budget 2026 can catalyse the next phase of growth by enabling policy frameworks that support creator monetisation, strengthen trust in influencer marketing, and position India as a global hub for creator-led digital commerce,” he added.

Digital platforms such as Instagram, YouTube, Twitch and Snapchat offer creators multiple monetisation routes, including advertising revenue shares, creator funds, paid subscriptions, tips and virtual gifts. If tips or gifts qualify for tax deductions while subscription income does not, creators may rethink how they encourage audience support, especially in live streaming, podcasting and influencer-led content.

However, the policy has limitations. The deduction is capped at $25,000 per year and begins to phase out at income levels of $150,000 for single filers and $300,000 for married couples filing jointly. Moreover, tips received in certain trades, including health, performing arts and athletics, are excluded, narrowing applicability for some entertainment-adjacent professions.

Startup push and state-level support

On the startup front, the government has already taken significant steps. According to CA Sarthak Ahuja, several state governments are offering interest-free loans of up to ₹15 lakh to individuals aged between 18 and 40 to help them start businesses.

Highlighting Uttar Pradesh as a key example, Ahuja said the state has allocated ₹1,000 crore in the previous financial year to assist nearly one lakh entrepreneurs annually, with a long-term goal of supporting around 10 lakh entrepreneurs over a decade under the Chief Minister Yuva Scheme.

The scheme follows a two-phase structure. In the first phase, eligible applicants can avail interest-free loans of up to ₹5 lakh, followed by an additional ₹10 lakh in the second phase. Banks are instructed to recover only the principal amount, with no interest and no collateral required. Entrepreneurs must contribute around 10% of the project cost, while the remaining amount is financed through the scheme. The repayment period is capped at four years, with a six-month moratorium.

The scheme supports a wide range of business models, including service and manufacturing enterprises as well as franchise-based ventures across sectors.

Read On: Is there a dark side to content creation?

Skill gaps and the need for education reform

B.I.G Media Co-founder Suyog Kiran Jadhav flagged a growing skills gap in influencer marketing. “We are hiring many interns right now who are pursuing BBA or Mass Media, but they lack a clear understanding of influencer marketing. Current courses offer only a basic overview. On-ground, practical knowledge is still missing,” he said.

Jadhav added that specific budget allocations are needed for new-age courses focused on the digital economy and digital marketing, especially until the government fully develops the Indian Institute of Creative Technology (IICT).

At the WAVES Summit 2025, Prime Minister Narendra Modi announced that ₹391 crore (around $46 million) has been sanctioned for setting up the country’s first Indian Institute of Creative Technology, positioned as a dedicated “creator school”. Additionally, Minister for Electronics and Information Technology Ashwini Vaishnaw announced a separate ₹830 crore ($1 billion) fund aimed at boosting the overall economy through improved capital access, skill development and global market integration.

As Finance Minister Nirmala Sitharaman prepares to present the Union Budget on February 1, the orange economy is watching closely. With India positioning itself as a potential global exporter of creator talent, Budget 2026 is being seen as a key opportunity to institutionalise the ecosystem.

CEOs and marketers agree that if addressed meaningfully, the Budget could mark a turning point, helping India transition from being a creator-rich market to a globally competitive, creator-led digital economy.