Marking a significant shift in digital taxation policy, the Finance Bill 2025-26 has proposed to withdraw the 6% Equalization Levy on online advertising services starting April 1, 2025.
The proposal to remove the Equalisation Levy on online advertisements is believed to be aimed at showing an accommodative stance to the US, which has threatened to introduce reciprocal tariffs from April 2.
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Notably, the Equalisation Levy was imposed on online advertisement services on June 1, 2016.
Last year, the government already removed a 2% Equalisation Levy on e-commerce transactions, but the 6 per cent levy on online advertisements continued.
The levy was imposed on payments made by Indian businesses to non-resident entities for digital advertising services. The move follows India’s commitment to align with the OECD’s global tax framework and comes amid renewed trade negotiations with the United States.
It is worth mentioning that the scrapping of the equalisation levy has been a long standing demand of companies like Google, Meta and Amazon and its removal will reduce the compliance costs for the big tech.
The equalisation levy was introduced by the Finance Act, 2016 on online advertisement services, provision for digital advertising space, or any other facility or service for the purpose of online advertisement only.
Further, the Finance Act, 2020, has extended the scope of this levy to e-commerce supply and services made/provided/facilitated on or after 01-04-2020.
Besides the removal of the Equalisation Levy, the government has also proposed amendments to make offshore fund investments less onerous and came out with changes relating to tax assessments under search and seizure provisions and reconciliation of income tax returns.
