Equalisation Levy

Equalisation Levy




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Equalisation Levy

Finance Act 2016 covered the concept of equalisation levy on specified services @ 6% of the amount of consideration received or receivable by non resident not having permanent establishment in India from resident in India or non resident having permanent establishment in India.

Specified services means:

  • Online advertisement
  • Any provision for digital advertising space or facilities/ service for the purpose of online advertisement;

Equalisation levy shall be levied in the following cases only:

  • The payment should be made to a non-resident service provider having no permanent establishment in India.
  • The annual payment made to one service provider exceeds Rs.1,00,000 in one financial year.
  • Payment made to service provider is for carrying out business or profession.

How equalisation is leviable?

It is leviable in the same way as TDS (Tax Deducted at Source) is leviable. That is the person making the payment for services is required to deduct 6 % equalisation levy and deposit the same with the government within 7 days from the end of month in which the amount is deducted.

Consequences if equalisation levy is not deducted:

  • Disallowance of 100% of the amount paid for services under section 40(a)(ib).
  • Failed to deduct levy–: penalty amount will be equal to the amount of Equalisation levy that assessee failed to deduct.
  • Levy has been deducted but not deposited: Penalty amount, in this case, will be 1,000 Rs. per Day till default continues but the total of a penalty shall not exceed the amount of equalisation levy.
Annual return for equalisation levy :
  • Annual return is require to be furnish electronically in Form No.1 on or before 30th June immediately following that financial year.
  • If assessee failed to furnish the Equalisation levy statement within the prescribed time, he has to pay penalty 100 Rs. Per day till the default continues.
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