India Proposes Mandatory AI Royalties for Copyrighted Content

India has unveiled a groundbreaking proposal that could redefine the relationship between artificial intelligence (AI) developers and copyright holders. In a draft policy released by the Ministry of Electronics and Information Technology (MeitY) in early December 2025, the government has proposed a mandatory royalty framework that would require AI companies to compensate creators whenever their copyrighted material is used to train generative AI models.

This ambitious move positions India among the first major economies worldwide to directly link AI innovation with intellectual property rights. The proposal, if enacted, will impact not only global tech giants and domestic AI startups but also millions of artists, writers, musicians, and media organizations concerned about how their work is consumed and replicated by machine learning systems.

A Landmark Step in the AI Era

The Ministry described the measure as a “necessary balancing mechanism between innovation and protection,” emphasizing that “AI cannot thrive in an ecosystem that disregards human creativity.” According to the government’s 42-page draft policy framework, any entity—domestic or foreign—operating AI systems in India or using Indian-generated copyrighted content must disclose their data sources and pay fair royalties for commercialization.

Officials said the policy aims to ensure that while India continues to foster AI innovation and digital growth, it does not do so at the expense of its vibrant creative economy.

“AI models are learning from human-made data, and that data has value,” said a senior MeitY official involved in drafting the proposal. “If music, images, or literary works are being scraped and used to fuel multimillion-dollar products, their creators deserve compensation.”

The official added that the “royalty obligation” would apply across both training and output stages — meaning AI companies may need to pay for access to copyrighted material during data training, and potentially again when their AI systems generate outputs substantially derived from such content.

Why India Is Moving Now

India’s decision comes amid intensifying global debate about copyright and AI. Over the past two years, artists, news organizations, and creative professionals across the world have accused AI developers of unfairly using their work without permission.

In the U.S., major lawsuits are pending against OpenAI, Meta, and Stability AI from writers and visual artists alleging unauthorized use of copyrighted data. The European Union, meanwhile, has adopted provisions within its AI Act requiring transparency on training datasets. In the U.K. and Japan, governments have been studying licensing-based solutions for generative models.

India’s proposal reflects a strategic effort to get ahead of the issue before unregulated AI practices overwhelm its massive digital ecosystem. The country is home to over 600 million internet users, a growing tech sector, and one of the world’s largest creative industries, spanning Bollywood films, regional music, gaming, and publishing.

The policy also comes as India positions itself as a global AI hub. The country has attracted billions in investment for cloud-based AI services, with homegrown firms like Haptik, Yellow.ai, and Krutrim competing alongside Microsoft, Google, and OpenAI for enterprise deployment. Policymakers thus see the new regulation not as a deterrent but as a foundation for responsible AI growth.

What the Draft Policy Proposes

The MeitY draft outlines several key provisions that, if enforced, will profoundly affect how AI developers train and deploy their systems in India.

1. Mandatory Licensing or Royalty Payments:
Any AI model trained on copyrighted material from Indian creators — including literature, art, film, photography, and software — would trigger royalty payments. These could be paid directly to rights holders or managed through a central licensing body established under the Copyright Act.

2. Disclosure of Training Data:
All AI developers must publicly disclose the dataset composition, specifying the volume and categories of copyrighted content used in model training. Non-disclosure could result in significant penalties and even a ban from the Indian market.

3. Local Oversight and Compliance:
A dedicated “AI Copyright Board” would oversee disputes, audit compliance, and determine fair royalty rates across industries. The body would also mediate between content owners and AI-based enterprises.

4. Cross-Border Applicability:
The obligations extend to foreign companies operating in India or whose AI systems are trained on Indian-origin data, regardless of the location of their data centers.

5. Penalties for Non-Compliance:
Companies that fail to comply with disclosures or royalty requirements could face fines up to ₹50 crore or 5% of global turnover — whichever is higher. Repeat violations could lead to suspension of licenses for AI-related operations in India.

Reactions from Industry Stakeholders

The proposal has sparked intense discussion across India’s tech and creative communities. While artists, journalists, and media associations have largely welcomed the move, AI developers and startups warn it could stifle innovation and drive up operating costs.

The Creative Sector’s Response:

Organizations such as the Indian Performing Right Society (IPRS), the Film Writers Association (FWA), and the Indian Newspaper Society (INS) have praised the government for “taking a courageous first step toward protecting human creativity in the algorithmic age.”

“This proposal acknowledges what artists have been saying all along — AI doesn’t create in a vacuum,” said Atul Churamani, a veteran music producer and board member of IPRS. “If a system is trained on thousands of Indian songs, scripts, or images, it’s only fair that creators receive a share of the value their work generates.”

The Tech Sector’s Concerns:

Tech companies, however, fear the framework could create a cumbersome regulatory environment. “We support ethical AI, but the administrative complexity of tracking royalty payments for every data point is enormous,” argued Krish Raghavan, CEO of an Indian generative AI startup. “Without clear guidelines or centralized licensing, it could become impossible for small players to compete.”

Industry groups are also urging the government to distinguish between “personalized AI applications” (like chatbots or local assistants) and “commercial-scale models” that use mass data training. The National Association of Software and Service Companies (NASSCOM) has sought stakeholder consultations before finalizing the draft.

The Legal Foundation: Copyright Meets AI

India’s 1957 Copyright Act already recognizes the rights of creators over their original works, but it never anticipated the scale or complexity of AI technologies that can reproduce style, tone, and expression indistinguishable from human output.

Under current law, copyright protection applies to human authors — AI-generated works are considered “unattributed” unless a human programmer or company claims ownership. The new proposal would update this framework by introducing a separate class of “AI-processed works,” subjecting them to transparency and remuneration obligations.

Legal experts say this could be one of the most consequential reforms in Indian copyright history.

“This proposal essentially treats AI as a secondary user of protected material, creating a legal duty to compensate original rights holders,” explained Dr. Aparna Viswanathan, an intellectual property lawyer at Delhi High Court. “It’s akin to how radio stations or streaming platforms pay royalties to musicians — but now, we’re talking about training data on a planetary scale.”

The Global Context: Following or Leading?

India’s plan draws inspiration from, yet goes further than, global developments in AI regulation.

• United States: Currently relies on litigation-based precedents, with the U.S. Copyright Office clarifying that “AI-generated works without human authorship” cannot be protected. But no standardized royalty system exists yet.

• European Union: Its AI Act mandates transparency for generative models and requires documentation of copyrighted data in training, though it stops short of compulsory royalty payments.

• China: Introduced provisional measures in 2024 requiring watermarking of AI-generated content and banning models trained on “illegal” data sources. However, licensing frameworks remain underdeveloped.

• Japan and South Korea: Adopted a more innovation-friendly stance, allowing data mining for AI research under fair use exemptions, provided it doesn’t harm the interests of creators.

By proposing enforceable royalties, India appears poised to chart its own course — a blend of European transparency and localized remuneration, reflecting both its democratic ethos and its economic ambitions.

What This Means for Global AI Players

The practical implications for global tech companies could be vast. Major AI developers rely heavily on large-scale internet data scraping to train models. If India enforces content-based royalties, companies like OpenAI, Google DeepMind, and Anthropic may need to negotiate licensing deals with Indian publishers, creative guilds, and collective management organizations.

This could also inspire similar demands in other markets. “If India makes it work, other emerging economies — like Indonesia, Brazil, or South Africa — may adopt comparable frameworks,” noted London-based AI policy analyst Mark Kaye. “It could lead to a global system of creative compensation embedded into AI economics.”

Faced with such conditions, tech firms may need to develop regionally compliant models trained only on licensed or synthetic data — a shift that would mark a departure from the sprawling, freely scraped datasets that dominated early AI development.

Economic Implications

Analysts predict that India’s royalty system could reshape both the creative and AI economies in multiple ways.

1. Monetizing Creativity at Scale:
Indian content creators could see new streams of income from AI royalties. Music catalogs, script libraries, and visual databases might become subscription-based training resources for AI developers. This could significantly boost revenues for artists, publishers, and media companies.

2. A Cost Challenge for Startups:
Conversely, compliance costs could rise for smaller AI ventures. Paying royalties or securing licenses might make it financially unviable to develop new models domestically, potentially pushing innovation offshore or encouraging the use of synthetic data.

3. Incentive for Data Veracity:
The law could encourage cleaner, better-documented datasets. Developers would need to verify data provenance, reducing the likelihood of biased, plagiarized, or low-quality inputs — a notable advantage for AI ethics and reliability.

4. Shifting Global Investment Patterns:
Foreign investors may initially hesitate due to regulatory uncertainty. However, if India succeeds in establishing a transparent and predictable royalty regime, it could attract ethical AI investment focused on high-quality, licensed data ecosystems.

“Fair Use” vs. “Fair Pay”: The Ongoing Debate

Critics argue that mandatory royalty payments risk undermining the concept of “fair use,” a doctrine that allows limited use of copyrighted works for purposes like education, research, or commentary. AI developers claim that model training qualifies as fair use because it doesn’t reproduce works verbatim but abstracts statistical patterns.

However, rights advocates counter that AI-generated outputs can mimic styles, voices, and creative decisions so closely that they effectively substitute for the original.

“Fair use was never meant to cover technology that competes with human authors,” said Mumbai-based digital rights activist Reema Saxena. “When an AI model can write like a novelist or sing like a playback singer, it’s reproducing value — and value must be compensated.”

The government’s draft carefully avoids labeling AI training as “infringement.” Instead, it introduces a third category: “derivative computational use,” which allows model training but mandates compensation. This formulation may become key to balancing both perspectives.

Implementation Challenges

While the proposal reflects a visionary approach, several practical questions remain:

• Assessing Royalties: How will authorities calculate fair market value for data usage when AI models are trained on billions of files?

• Identifying Sources: Can developers accurately trace specific copyrighted works inside complex neural networks?

• International Enforcement: How will India enforce payments from companies headquartered abroad, especially when their data processing occurs outside national borders?

• Bureaucratic Delays: Establishing a regulatory board and licensing infrastructure could take years, potentially delaying AI growth.

To address some of these issues, the draft suggests using blockchain-based tracking systems for data provenance and automated royalty accounting — an idea still under exploration.

Voices from the Creative Frontline

Artists across sectors see in this policy a long-overdue recognition of human contribution in an era of machine-assisted creation.

“I’ve seen my photography appear in AI image tools without my consent,” said Ananya Dutta, a visual artist from Kolkata. “If this law passes, at least there’ll be accountability — and maybe a sense of respect for the person behind the pixel.”

Writers’ groups, too, have welcomed the initiative. Members of the Indian Authors Guild said that while enforcement will be difficult, the principle is crucial. “This is the first time lawmakers are putting a monetary value on creativity in the context of AI,” noted author and guild chair Pranay Lal. “Even if imperfect at first, it sets a precedent that can evolve.”

The Tech Sector’s Counterarguments

Tech industry representatives caution that overregulation might slow India’s AI progress, especially when competing nations adopt lighter regimes to attract innovation. They argue that innovation thrives when data flows freely.

“AI systems learn patterns, not content,” explained Shruti Mehra, AI product director at a Bengaluru firm. “Requiring royalties for every dataset would be like charging a student for every book they read before inventing something new.”

Some propose alternative mechanisms:

• Opt-out systems for creators who do not want their work used in training.

• Voluntary licensing marketplaces where creators set terms and prices.

• “Data trusts” managed by neutral institutions to facilitate transparent access.

The government indicated it is open to refinement before finalization. Stakeholder consultations are expected through early 2026, with formal legislation possibly introduced in parliament by mid-year.

Public Sentiment and Digital Rights

Public reaction online has been mixed. Many Indian internet users support fair compensation for artists, but some worry about how the policy might affect access to open-source AI tools and digital inclusivity. Social media commentaries reveal a nationwide awareness of the issue, reflecting growing familiarity with generative AI through platforms like ChatGPT, Gemini, and Perplexity AI.

Civil society groups have urged the government to ensure that the law does not criminalize small-scale use or educational AI research. “Royalty should apply to commercial exploitation, not student projects or open innovation,” said the Internet Freedom Foundation in a statement.

Global Observers Watch Closely

Several international policy think tanks, including the World Intellectual Property Organization (WIPO), are monitoring India’s proposal closely. At a recent Geneva conference, WIPO officials described India’s draft as “one of the most comprehensive frameworks yet proposed by a developing economy.”

If successful, India’s model could inform global guidelines for “fair AI practices,” potentially influencing WTO and G20 discussions on technology trade and data sovereignty.

Economists also stress that India’s cultural output — from Bollywood to music streaming and digital media — constitutes a multibillion-dollar intellectual property export. Protecting this asset base aligns directly with the country’s goal to become a $5 trillion economy while preserving cultural autonomy in the digital age.

What Happens Next

The draft policy is open for public feedback until February 2026. Following consultation rounds, MeitY plans to finalize the guidelines and present them before Cabinet for approval. Once enacted, portions of the law would be integrated into the Information Technology Act and amended Copyright Act provisions.

Implementation could unfold in phases:

1. Establishment of the AI Copyright Board.

2. Creation of licensing databases and transparent registry systems.

3. Technical guidelines for dataset disclosure and model auditing.

4. Gradual enforcement with transitional grace periods for AI startups.

If executed effectively, the law could go into effect by early 2027 — just as India’s AI market, projected to reach $20 billion, enters a new growth phase.

A Turning Point for AI Ethics

India’s proposal underscores a fundamental question that the world’s AI revolution must confront: who owns the knowledge encoded into intelligent machines?

By tying technology back to human creativity, India appears intent on reminding the global economy that innovation without fairness is unsustainable. Whether the measure becomes a model for others or an overreach that hinders progress remains to be seen, but one thing is certain — the age of unregulated AI data harvesting may be approaching its end.

As one Delhi-based AI researcher summarized, “If AI is humanity’s next great invention, it should also be humanity’s shared responsibility.”