The Indian government has removed the 6 per cent equalisation levy on online advertisements starting April 1, 2025. This move is expected to result in a revenue loss of over ₹3,000 crore in the financial year 2025-26, a senior official told Moneycontrol.
“…Equalisation levy collected in 2023-24 was at around ₹3,500 crore and at ₹3,300 crore in 2024-25,” the official told Moneycontrol, confirming the revenue loss figure. This decision, announced in the Finance Bill 2025-26, will benefit global tech companies like Google, Meta, and Amazon by reducing their tax burden and operational costs in India.
Impact on government revenue
The government is also set to forego a substantial amount of revenue as a result of tax relief measures outlined in the Union Budget 2025. Finance Minister Nirmala Sitharaman said various tax concessions, such as higher rebate limits and reduced tax rates, could result in a revenue shortfall of around ₹1 trillion in FY26.
Trade and diplomatic implications
The decision comes at a time when India and the US are involved in broader trade negotiations. According to the Moneycontrol report, analysts speculated that the move was influenced by US President Donald Trump’s reciprocal tariffs on countries that imposed digital taxes on US tech firms. However, Finance Minister Sitharaman denied this.
“Withdrawal of the Equalisation Levy is not a reaction to President Trump’s tariff wars. The 2 per cent Equalisation Levy was withdrawn after stakeholder discussions in July 2024, which was before Trump took office. Removal of the 6 per cent Equalisation Levy is a part of that process,” Sitharaman clarified on March 27.
What is the equalisation levy in India?
India had introduced the equalisation levy in 2016 to tax digital advertising revenues earned by foreign companies that do not have a physical presence in India. It was applied to payments made by Indian businesses to non-resident companies for online advertisements, digital ad space, and related services. The levy was set at 6 per cent on the total payment made to foreign companies like Google and Facebook, provided the annual transaction exceeds ₹1 lakh. Indian businesses making such payments were responsible for deducting and depositing this levy.
In 2020, the scope of the Equalisation Levy was expanded with a 2 per cent tax on revenue generated by foreign e-commerce platforms from Indian users. This was applied to digital marketplaces, cloud services, and online transactions involving foreign sellers.
However, the levy was not applied to companies with a permanent establishment in India or to individuals making payments for personal use.
Source from: https://www.business-standard.com/industry/news/india-equalisation-levy-removed-tax-impact-2025-125040100810_1.html
