Income Tax

Did you Know about Equalisation Levy? Remittance & Deduction and Consequences of failure to deduct Equalisation Levy. Full Guide.

Equalisation Levy

Here, we learn about Equalisation Levy, Meaning of Specified Services, Deduction of Equalisation Levy, Remittance of Equalisation Levy, Penalty,Consequences of failure to deduct Equalisation Levy.

As per Chapter VIII of the Finance Act, 2016 addresses the challenges by introducing Equalisation Levy on Specified Services. The Provision of Equalisation Levy is extending to whole India except the State of Jammu and Kashmir.

In the digital domain, business may be conducted without regard to national boundaries and may dissolve the link between an income-producing activity and a specific location. The typical taxation issues relating to e-commerce are:

  • the difficulty in characterizing the nature of payment and establishing a nexus or link between taxable transaction, activity and a taxing jurisdiction.
  • the difficulty of locating the transaction, activity and identifying the taxpayer for income tax purposes.

Taking into consideration the potential of new digital economy and the rapidly evolving nature of business operations. it becomes necessary to address the challenges in terms of taxation of such digital transactions.

Charge of Equalisation Levy

Equalisation Levy is levy @ of 6% of amount of consideration receive or receivable. It is levy for Specified Services by a Non Resident not having permanent establishment in India or providing services not effectively connected with his permanent establishment in India. From a resident in India carrying on business or profession and from a Non Resident having permanent establishment in India.

Meaning of Specified Services

Specified Services mainly includes the following Specified Services.

  • Online advertisement.
  • Any Provision for digital advertising space or any other facility or service for online advertisement.
  • Any other service notified by the Government.

If the aggregate amount of such consideration receive or receivable for specified services by a Non Resident exceed Rs. 1 lakh in any Previous Year then Equalisation Levy is attracted. Similarly, if consideration is not exceeding 1 lakh then Equalisation Levy is not attracted.

However, Equalisation Levy shall not be charged in following three situations.

1.Where the Non Resident providing the specified services has a permanent establishment in India and the specified services is effectively connected with such permanent establishment.

2.Where the payment for the specified services by the person resident in India is not for the purpose of carrying out business or profession.

3.Where the aggregate amount of consideration received or receivable for “specified services” provided by the Non Resident from a person resident in India and Carrying on business/profession or from a Non Resident having a permanent establishment in India, does not exceed RS. 1 Lakh in any previous Year.

Deduction of Equalisation Levy

Equalisation Levy @6% is deductible from consideration paid or payable for specified services by a resident carrying on business or profession or Non Resident having PE in India. if the aggregate consideration exceeds R 1 lakh.

Remittance of Equalisation Levy

Equalisation Levy is deducted during any month to be paid to the credit of the Central Government by the 7th of the next month.

Consequences of failure to deduct Equalisation Levy

1.The person liable to deduct Equalisation Levy has to, in any case, pay the Equalisation Levy to the credit of the Central Government by the 7th of the next month.

2.Simple interest@1% p.m. or part of a month is attracted for the period of delay in remittance.

3.Penalty is levy for equal the amount of Equalisation Levy deductible.

For delayed remittance, penalty @ R 1,000 per day of failure attracted, not exceeding the amount of Equalisation Levy not paid.

Similarly, You can read our other article on How to Calculate House Rent Allowance? HRA Exemption-HRA Rules |Section 10(13A)”. in this post we discus in details about the calculation House Rent Allowances.

In Addition, you also know the concept of One Person Company by click on this link.What is a One Person Company? And Difference between Sole Proprietorship & One Person Company (OPC).

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