India proposes to abolish digital tax on online advertisements

Aimed at showing an accommodative stance to the US, which has threatened to introduce reciprocal tariffs from April 2, India on Monday proposed to abolish the equalisation levy or digital tax on online advertisements as part of the 59 amendments to the Finance Bill 2025, which is being debated in the Lok Sabha.

Advertisement

While the government has already abolished the 2 per cent equalisation levy on e-commerce transactions last year, the 6 per cent levy on online advertisement services, which was imposed on June 1, 2016, continues.

Minister of State for Finance Pankaj Chaudhary introduced the amendments to Finance Bill 2025 in the Lok Sabha.

AKM Global Tax Partner Amit Maheshwari said although the 2 per cent levy garnered more criticism from the US, in anticipation of more tariff retaliation by them, the government is trying to show a more accommodative stance, and the removal of 6 per cent equalisation levy on online advertising is a step in that direction.

He added that it remains to be seen if this step, coupled with already ongoing diplomatic measures, would lead to any softening of stance by the US.

“The government’s move to propose the abolition of the equalisation levy altogether is a step in the right direction, as it not only brings certainty to taxpayers but also addresses the concerns raised by partner nations (like the US) regarding the unilateral nature of the levy,” Nangia Andersen LLP Partner Vishwas Panjiar said, while adding that 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.

Pointing out that several amendments have been made to provisions related to search and seizure assessment, the experts said 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.

“The proposed amendments to the Finance Bill 2025 are largely clarificatory in nature,” Deloitte India Partner Anil Talreja said, while adding that these are in line with the mission of the government to address doubts and issues being faced by the taxpayers and businesses at large.