The Indian government is considering scrapping the 6% equalisation levy on online advertising services provided by offshore tech giants like Google, Meta, and Amazon. The proposed move is seen by many as a step towards mending trade ties with the United States, which has been vocal about its objections to such digital taxes.
Just last year, India withdrew the 2% digital services tax applied to foreign e-commerce transactions. That rollback came after mounting pressure from Washington, which had argued that such levies unfairly targeted American companies.
Experts reckon this latest development could be part of a broader strategy to ease diplomatic tensions. “The removal of the 6% levy on online advertising aligns with India’s broader strategy to create a more favourable tax environment while addressing US concerns,” said Amit Maheshwari, tax partner at AKM Global.
While the earlier 2% tax had drawn sharper criticism, many believe this additional move could support an ongoing diplomatic understanding between the two countries.
Back in 2020, the United States had opened an investigation into digital taxes imposed by countries including India, Austria, Italy, Spain, Turkey, and the UK. The US argued that such taxes violated international norms and unfairly affected American tech firms such as Apple, Amazon, Google, and Facebook.
The equalisation levy was introduced as a temporary fix to tax digital business activities until a global tax framework could be agreed upon. With talks ongoing at the global level, some see India’s decision to remove this tax as a step towards aligning with a future multilateral system.
Beyond digital tax reforms, India has also proposed key changes to how tax assessments are handled—particularly in cases involving undisclosed income found during raids and investigations.
One major tweak: the term ‘Total Income’ is being replaced with ‘Total Undisclosed Income’ in sections 113, 132, and 158 of the Income Tax Act. This change aims to make it clear that penalties will only apply to income that wasn’t previously reported to the tax department.
There’s also a new clause being added to Section 143(1), which allows tax officials to compare your current tax return with previous years’ filings. If something doesn’t quite add up, it could trigger a closer look. Authorities hope this will improve compliance and reduce disputes during assessments.
India seems to be rethinking how it taxes big foreign tech companies and how it handles undisclosed income cases. While none of this is confirmed yet, it’s clearly part of a bigger picture—making the tax system simpler, a little fairer, and possibly more in line with international expectations
