Navigating the Equalization Levy

Background: India initiated the Equalization Levy in 2016 to tax digital transactions by non-resident companies operating within the country. E-commerce Tax: Recent updates enforce a 2% levy on e-commerce sales by non-residents targeting Indian consumers, aiding tax revenue and local business fairness.

Advertising Levy: A 6% levy on advertising services sold by non-residents in India ensures fair taxation on larger transactions exceeding INR 1,00,000 annually. Illustration: Aishwarya, purchasing INR 2,00,000 worth of Google Ads, deducts 6% (INR 12,000) before payment, adhering to the levy requirement.

E-commerce Clarification: Non-resident e-commerce platforms engaging in Indian advertising face a 6% levy, distinct from the 2% levy on e-commerce turnover over INR 2 crore. Example: Amazon's INR 50 crore e-commerce sales incur a 2% levy (INR 1 crore), ensuring fair taxation compared to pre-levy scenarios.

TDS Implementation: Section 194O mandates Tax Deducted at Source (TDS) by non-residents on sales in India, ensuring compliance and revenue collection. Illustrative Example: Airbnb deducts 1% TDS (INR 100) from Yatrik's INR 10,000 rental income, depositing it with the Indian Government, promoting tax compliance. Thresholds: TDS is applicable if annual sales exceed INR 5,00,000 for resident companies, emphasizing compliance and revenue accountability.