The Ramayana Raid Is About More Than Namit Malhotra. Why Bollywood’s Overseas Money Flows Are Drawing Tax Scrutiny

On October 7, the Income Tax Department searched the Mumbai offices of Prime Focus Ltd, the company founded and headed by Namit Malhotra, along with premises linked to its statutory auditor and certain individuals associated with the company.

Reports said the searches were connected to foreign remittance transactions, although the authorities have not publicly disclosed which transactions are being examined or what specifically triggered the action. 

That distinction matters. An Income Tax search is not, by itself, proof that a company has committed a tax offence. Prime Focus has said it is cooperating with the authorities and that, at the time of its response, no findings or alleged violations had been communicated to the company. Its business operations, it said, continued normally. 

Yet the words “foreign remittances” make this more interesting than a routine tax search, particularly because Prime Focus is not a company whose business is confined to India. Reports have said that around 92% of its revenue comes from overseas operations. In other words, money moving across borders is not an unusual feature of its business; it is central to the way the company operates. India Today

That is precisely why the question is bigger than Namit Malhotra, Prime Focus or even Ramayana.

As Indian cinema becomes an increasingly global business, money can move across borders for production, visual effects, technology, distribution, intellectual property, licensing, marketing and a host of other services. None of that is inherently problematic.

But every international payment raises another set of questions for the tax authorities: what was the money actually paid for, who received it, was the transaction correctly documented, was the right amount of tax paid and, most importantly, where should that income have been taxed?

Namit Malhotra Is Not Just The Man Behind Ramayana

The connection to Ramayana is what has turned the Prime Focus search into a major Bollywood story. Namit Malhotra is producing the two-part epic through Prime Focus Studios, in association with DNEG and Yash’s Monster Mind Creations.

The film, directed by Nitesh Tiwari, stars Ranbir Kapoor as Rama, Sai Pallavi as Sita and Yash as Ravana, among others. Prime Focus describes it as a global cinematic project combining filmmaking, visual effects and technology, a projected scale of around ₹4,000 crore. 

But reducing Malhotra to the producer of Ramayana misses the more important corporate story.

Prime Focus is a global media and entertainment business with operations spanning visual effects, animation, post-production and related services. Its international footprint means that its financial architecture is also fundamentally different from that of a conventional Indian production house making a film largely within the country. 

That distinction becomes particularly relevant when foreign remittances enter the picture.

A company involved in a project of Ramayana’s scale can potentially have legitimate financial relationships with entities outside India – whether for visual effects, technology, production services, intellectual property, international distribution or other specialised work.

The film itself is being positioned for a global audience, with international distribution through Sony Pictures, while Prime Focus’ wider business already operates extensively outside India. Primefocus Limited

So the important question is not simply why money is leaving India. It is what that money represents.

That makes the movement of money both inevitable and potentially complicated.
And with Ramayana reportedly being mounted at a ₹4,000 crore scale, the numbers involved are large enough that even seemingly ordinary questions about contracts, services, related parties, tax deductions and the location of profits can become significant.

Then There Is The ₹3,000 Crore Question

There is another reason the Prime Focus story deserves to be looked at as a corporate story rather than simply a Bollywood raid.

Just a week before the Income Tax searches, on September 30, Prime Focus shareholders approved a plan allowing the company to raise up to ₹3,000 crore. The approval came at its 29th Annual General Meeting and followed a September 4 board decision to pursue a fundraise of up to the same amount, including through a Qualified Institutions Placement or other permitted routes. scanx.trade

Bollywood Is No Longer A Business That Stops At India’s Borders

The easiest way to misunderstand the Prime Focus story is to imagine a Bollywood film as a largely Indian transaction. A producer raises money, hires actors and technicians, shoots the film, pays for post-production and eventually collects money from theatres and streaming platforms.

In fact, Prime Focus is almost a textbook example of why the distinction matters. If the overwhelming majority of a company’s business is international, substantial cross-border transactions are an ordinary consequence of its business model. The mere fact that money moves from an Indian company to an overseas entity does not make the transaction suspicious.

There are already formal tax mechanisms around such payments. For example, India’s Income Tax Department requires information to be furnished for foreign remittances through Form 15CA, with Form 15CB certification required in certain cases where a payment to a non-resident is chargeable to tax. 

The film industry has also had to deal with these questions for years. In a case involving Yash Raj Films, for instance, the tax authorities examined payments of more than ₹18.77 crore made to overseas service providers for shooting a film in Poland.

The company argued that the payments were for expenses such as transport, accommodation and other arrangements and that the overseas companies did not have a permanent establishment in India. The case ultimately turned on questions around the nature of those payments and India’s tax rules and treaty provisions. 

That example is useful because it demonstrates the basic problem: the existence of an overseas payment isn’t the end of the tax question. It is the beginning of one.

If an Indian production company pays a foreign company ₹10 crore, the tax authorities may need to understand what the ₹10 crore represents. Is it payment for shooting expenses? A technical service? A royalty? Distribution rights? A genuine business expense? A payment to a related company? Each possibility can carry different tax implications.

And once the amounts become hundreds of crores, the distinction becomes considerably more consequential.

So Why Does The Taxman Care Where Bollywood’s Money Goes?

This is where the Prime Focus story moves from “money going abroad” to the much more important question of what happens to the tax liability attached to that money.

Suppose an Indian film company pays an overseas company ₹50 crore. There is nothing inherently unusual about that. But the tax authorities can potentially ask several questions.

What service did the foreign company provide?
Was that service actually provided?
Was ₹50 crore a commercially reasonable price?
Who owns the foreign company?
Is it related to the Indian company?
Was the payment subject to withholding tax in India?
And was the income reported and taxed in the appropriate jurisdiction?

These questions matter because an international transaction can affect not just where money physically goes, but where profits ultimately appear.

India’s transfer-pricing rules, for example, apply to international transactions between associated enterprises and are designed to examine whether those transactions are conducted on an appropriate arm’s-length basis. The Income Tax Department explicitly says that transfer-pricing provisions apply to international transactions with associated enterprises, regardless of the amount involved. 

Then there is withholding tax.

When an Indian company makes certain payments to a non-resident, the tax treatment can depend on what the payment actually represents. Royalties, fees for technical services, interest and other categories of income can have specific tax implications, while tax treaties between India and the recipient’s country can also affect the final position. 

This is why the invoice alone isn’t necessarily the whole story.

Take VFX as a simple example. An Indian production company could legitimately pay an overseas visual-effects company for work on a film. But if the two companies are part of the same corporate group, the tax authorities may have an additional question: was the price charged for that work consistent with what independent companies would have paid?

Or take an overseas production expense. A film may genuinely shoot abroad and pay a foreign company to arrange locations, accommodation, transport, permissions and logistics. Again, perfectly legitimate. But the authorities may still want to establish that the expenditure actually occurred, that the recipient provided the stated services and that the payment received the correct tax treatment.

And there is another reason this has become particularly relevant now.

In August 2026, the Income Tax Department launched a nationwide verification exercise covering hundreds of entities and professionals over suspected irregularities in large foreign remittances. The exercise was reportedly driven by data analysis identifying remittances that appeared disproportionate to the entities’ reported business activity, with scrutiny also extending to Form 15CB certifications.

That does not mean Prime Focus is part of that exercise or that its transactions were necessarily irregular. But it does provide useful context for why large overseas payments are receiving greater attention from the tax authorities.

The issue, ultimately, is not “Why is Bollywood sending money abroad?”

It is:“If the money is going abroad, what exactly is it paying for, who is receiving it, what profit is being generated, and has the correct tax been paid on that transaction?”

And for an industry increasingly built around international production, international rights and international distribution, those questions are only going to become more important.

The Other Question Is Withholding Tax

Transfer pricing is only one piece of the puzzle.

There is another, more immediate question whenever an Indian company sends money to a foreign entity: was tax required to be deducted before the money left India?

The answer depends on what the payment actually represents.
A payment for an overseas production service is not necessarily treated in the same way as a royalty, a payment for technical services, interest or another category of income. Tax treaties between India and the recipient’s country can further affect the treatment.

That means an overseas invoice saying “production services – ₹20 crore” doesn’t necessarily settle the tax question.

The authorities can look at the underlying agreement, the nature of the work, where it was performed, who performed it, who received the money and whether the payment falls within a category on which India has a right to tax.

This is also why documentation becomes critical.

Why The Film Industry Can Be Particularly Difficult To Audit

The complexity becomes much greater when we move from a single transaction to an entire film.

A large production can involve a producer in India, a foreign VFX company, an overseas distributor, international shooting locations, talent agencies, technology providers, rights holders, marketing companies and streaming platforms.

Each can sit under a different contract.
Each can potentially be paid through a different entity.
And each transaction can have a different tax treatment.

There is also the issue of intellectual property.

A film isn’t just a physical product that is made once and sold once. It generates a collection of rights – theatrical rights, satellite rights, streaming rights, overseas distribution rights, remake rights, music rights and other forms of licensing. Those rights can have enormous financial value and may be held, licensed or exploited across different jurisdictions.

That makes the financial architecture of a major film far more complicated than its production budget suggests.

India already has reporting mechanisms specifically aimed at increasing transparency around film-production payments. For example, film producers have reporting obligations under Form 52A covering specified payments made to people engaged in film production.

But even with those mechanisms, a global production can leave tax authorities with a difficult task: following the economic substance of the transaction rather than simply following the bank transfer.

The Last Bit, When Does A Legitimate Overseas Payment Become A Red Flag?

This is perhaps the most important distinction in the entire story.

International payments are not the red flag. Unexplained or improperly structured international payments can be.

And where an overseas entity receives significant amounts despite apparently having little corresponding business activity, employees, assets or operational role, authorities may want to understand why that entity sits in the transaction at all.
None of these circumstances, individually, proves wrongdoing.

That is critical.

A multinational film company can have legitimate reasons for using subsidiaries, overseas vendors and international rights-holding entities. A VFX company may genuinely perform hundreds of crores worth of work. A foreign production company may genuinely incur substantial costs on behalf of an Indian film.

The tax question is whether the contracts, money, services and tax treatment all tell the same story. The money is global. The tax authorities, inevitably, have to follow it.