Equalisation levy taxed certain digital transactions with non-residents: 6% on online advertising payments and a 2% levy on e-commerce supply of goods and services. The 2% e-commerce equalisation levy was withdrawn with effect from 1 August 2024; the status of the 6% advertising levy should be verified against the latest Finance Act.
The two levies
| Levy | Rate | Scope |
|---|---|---|
| Advertising EL (2016) | 6% | Online advertisement payments to non-residents (B2B, above Rs.1 lakh/year) |
| E-commerce EL (2020) | 2% | E-commerce supply/services by non-resident operators |
The 2% levy withdrawal
The 2% e-commerce equalisation levy was withdrawn with effect from 1 August 2024, responding to concerns over scope and the global digital-tax negotiations. Transactions on or after 1 August 2024 are not subject to the 2% levy (withdrawn via Finance (No. 2) Act, 2024).
Status of the 6% levy
The 6% advertising equalisation levy on online advertisement payments to non-residents was the original 2016 levy. The 6% levy is governed by Chapter VIII of the Finance Act, 2016 — it is separate from the Income Tax Act, 2025 and continues in force as of FY 2026-27. The 2% e-commerce levy was separately abolished w.e.f. 1 August 2024.
Compliance where it applies
- Where the levy applies, the payer deducts and deposits it (advertising EL) and files the annual statement in Form 1.
- Income subject to equalisation levy is exempt from income tax under Section 10(50) to avoid double taxation.
- Interest and penalty apply for late deposit or non-compliance.
- Watch the overlap with GST on import of services on the same payment.
Key takeaways
- Two levies: 6% on online advertising, 2% on e-commerce.
- The 2% e-commerce levy was withdrawn from 1 August 2024.
- Verify the current status of the 6% advertising levy.
- Income covered by EL is exempt under Section 10(50).