An expanded and stricter tax collection and TDS system has helped identify significant transaction. (Image source: Freepik)

HYDERABAD: A recent Income Tax investigation uncovered large-scale cash transactions in Tollywood, exposing an intricate network of financiers, film producers, and distributors involved in unaccounted money circulation.
The searches on prominent production houses and producers revealed that many high-budget films, some costing hundreds of crores, are funded through cash loans obtained at exorbitant interest rates.
Lead actors in these films demand a significant portion of their remuneration in cash, compelling producers to secure funds from financiers and distributors. Financiers based in Andhra districts provide cash loans at interest rates of 10-12%, which are then lent to producers at rates as high as 26-30%. These loans are expected to be repaid once the film is completed and sold to distributors, who in turn rely on unaccounted cash from the black market.
The cash flow cycle continues with film releases, particularly in rural and semi-urban areas where ticket sales generate cash revenue in the initial days. Distributors use these collections to repay financiers, ensuring the continued movement of unaccounted money. However, in urban centres and multiplexes, where digital transactions dominate, the cash flow is significantly lower.
During the raids, the Income Tax department did not find large cash reserves but seized extensive documentation, including cash loan records and receipts. A significant volume of digital data, stored on hard disks and other storage devices, is under scrutiny to trace financial routes.
Investigators also identified production companies operating from Dubai, the US, and other offshore locations. While these firms are not registered under local producers’ names, film rights are being transferred to them, facilitating the movement of money abroad.
Authorities are now focused on unearthing links between these offshore entities and local film production houses. Sources indicate that the prevalence of cash transactions in the industry has deterred major international studios from investing in Indian cinema. The ongoing probe aims to establish the scale of financial irregularities and possible tax evasion within the industry.