Equalisation levy on Digital Ads!

The Equalisation Levy of 6% is applicable only to Non Resident companies. Equalisation Levy is applicable if the aggregate amount of consideration for the Advertisement service is more than Rs.1 lakh a year. Equalisation levy is not applicable if the aggregate amount is below Rs.1 lakh.

Equalisation Levy is very similar to TDS in the manner that the deduction will be made from the total deposit and paid to the Central Government. Equalisation Levy is not applicable to companies registered in Jammu and Kashmir.

Why was it Introduced?

"Equalisation Levy" was very much needed in order to correct certain rules in the Indian Income Tax Act. A NRI's income is taxable as per Indian Income Tax rules but any company that does not have any permanent establishment in India will not be taxed. As a result, many of these companies manage to make a huge profit through the digital advertising sector without paying any taxes. In order to ensure that every taxation is taxed, Equalisation Levy was introduced.

When will Equalisation Levy be deducted?

Equalisation Levy is deducted on the date of payment or on date of credit, depending on whichever is earlier. But by rule, Equalisation Levy has to be paid by 7th of the following month after deduction.

Consequences of not paying Equalisation Levy

Given below are the two consequences of not paying Equalisation Levy:

1. In case of failure to deduct and pay: Penalty that is equal to the Equalisation Levy amount should be paid in addition to interest under section 170.
2. In case of deduction but failure to pay: A penalty of Rs.1000 should be paid for every day till the amount is paid in addition to the interest under section 170.

In case of failure to file the return, a penalty of Rs.100 will be levied per day for the period of failure.