Rapid Fire
Proposed Abolition of Equalisation Levy
- 26 Mar 2025
- 2 min read
The Union Government has proposed abolishing the Equalisation Levy which will benefit advertisers on digital platforms like Google, X (formerly Twitter), and Meta by reducing tax burdens.
Equalisation Levy (Digital services tax):
- About: Equalisation Levy, introduced in 2016, is a direct tax imposed on foreign digital service providers to tax income generated from digital transactions in India.
- Objective: It aims to ensure fair taxation of digital businesses that do not have a physical presence in India, aligning with the BEPS (Base Erosion and Profit Shifting) Action Plan to curb tax avoidance.
- Applicability: It is deducted at the time of payment by the service recipient if:
- The payment is made to a non-resident service provider.
- The annual payment to a single provider exceeds Rs. 1,00,000 in a financial year.
- Covered Services & Tax Rates: The Equalisation Levy initially applied to online ads (6%) and was expanded in 2020 to cover digital services and e-commerce (2%), with the latter abolished in August 2024.
- Exemptions: It does not apply if the non-resident has a permanent office in India, payments are below Rs.1 lakh, or the income is covered under Section 10(50) to prevent double taxation.
- Income taxed as royalties or fees for technical services is excluded.
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