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As part of the amendment, effective April 1, 2025, the 6 per cent Equalisation Levy on online advertisements will be abolished. This will reduce the tax burden on digital ad consumers and costs on platforms like Google, X and Meta.
The Equalisation Levy, first imposed on June 1, 2016, was designed to tax online advertising services, digital ad space, and related facilities.
The government on Monday proposed abolishing the 6% Equalisation Levy on online advertisements from April 1, 2025, a move expected to benefit advertisers on digital platforms such as Google, X, and Meta. This is part of the 59 amendments to the Finance Bill introduced in the Lok Sabha by Minister of State for Finance Pankaj Chaudhary.
The Equalisation Levy, first imposed on June 1, 2016, was designed to tax online advertising services, digital ad space, and related facilities. As per the amendments to the Finance Act, 2016, Section 163 will no longer apply from April 1, 2025. The Finance Act, 2020, had further extended the levy’s scope to e-commerce transactions at a rate of 2%, but this was abolished on August 1, 2024.
The removal of the levy on online ads is seen as a strategic move amid US pressure, as Washington has threatened to impose reciprocal tariffs from April 2. Deloitte India Partner Sumit Singhania noted that scrapping the Equalisation Levy aligns with the government’s broader goal of simplifying income tax laws.
AKM Global Tax Partner Amit Maheshwari highlighted that while the 2% levy on e-commerce drew more criticism from the US, the government’s decision signals an effort to prevent further trade tensions. “The removal of the 6% Equalisation Levy on online advertising is a step in that direction. However, it remains to be seen if this step, coupled with already ongoing diplomatic measures, would lead to any softening of stance by the US,” he said.
Nangia Andersen LLP Partner Vishwas Panjiar called the move “a step in the right direction,” as it brings certainty to taxpayers and addresses concerns from partner nations regarding the unilateral nature of the levy.
Beyond the Equalisation Levy, the government has also proposed changes to simplify offshore fund investments and refine tax assessments under search and seizure provisions. “Several amendments have been made to provisions related to search and seizure assessment…The government has added the new term Total Undisclosed Income to clarify that the intent of search and seizure proceedings is to bring only undisclosed income to tax,” Maheshwari added.
(With PTI Inputs)
