Government Plans to Abolish 6% Equalisation Levy on Online Ads

India Moves to Scrap 6% Equalisation Levy on Online Ads Amid Trade Talks

The Indian government has proposed eliminating the 6% equalisation levy on online advertising services provided by non-resident tech companies. This move, aimed at fostering better trade relations with the United States, is part of 59 amendments introduced in the Finance Bill, 2025 by Minister of State for Finance, Pankaj Chaudhary.

The removal of the levy will benefit companies like Google, Meta, and X, aligning with India’s earlier decision to eliminate the 2% ecommerce levy from 1 August 2024. However, to maintain tax neutrality, the government also plans to withdraw income-tax exemptions under Section 10(50), bringing online ad revenues under standard taxation.

Impact on US-India Trade Relations

The move comes ahead of bilateral trade discussions between New Delhi and Washington, with the US previously imposing retaliatory tariffs over India’s digital tax measures. Amit Maheshwari, Tax Partner at AKM Global, noted that this step signals India’s accommodative stance to mitigate potential trade conflicts.

“Removing the 6% levy on online ads is a step in that direction, but it remains to be seen if this, along with ongoing diplomatic efforts, will soften the US stance,”  Maheshwari said to a leading news portal.

Key Tax & Finance Bill Amendments

Beyond the equalisation levy, the Finance Bill, 2025, proposes several significant changes:

• Pension Classification Clarified: The government reaffirms its authority to classify pensioners by retirement date, ensuring new pay commission benefits apply only prospectively
• Electronics Manufacturing Taxation Simplified: Section 44BBD (25% presumptive tax) will now explicitly exclude Sections 44DA and 115A, preventing taxation disputes in the electronics manufacturing sector
• Search & Seizure Taxation Refined: Sections 113, 132, and 158 will replace ‘Total Income’ with ‘Total Undisclosed Income’, ensuring legally disclosed income is not unfairly taxed during search and seizure operations
• ITR Processing Adjustments: Section 143(1) will be updated to allow centralised processing centres (CPCs) to reconcile ITR filings with past returns, improving tax compliance and accuracy
• Offshore Fund Regulations Relaxed: The rule limiting Indian residents’ indirect ownership in offshore funds (under Section 9A) will be removed, allowing greater foreign fund flexibility.

Conclusion

By removing the 6% equalisation levy, the Indian government aims to ease trade tensions, attract foreign investment, and streamline taxation for global digital companies. With additional reforms in pensions, tax structures, and corporate regulations, the Finance Bill, 2025, marks a progressive shift in India’s economic and trade policies, ensuring a business-friendly regulatory environment. Consult a tax expert today from Vakilsearch to streamline your taxes. 

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Akash G Varadaraj

Content Writer at Vakilsearch

I'm Akash. G. Varadaraj, an official content writer at Vakilsearch with over four years of experience. I'm here to simplify complex legal concepts into easily accessible articles that even a layman can understand. As a regular contributor to this news portal, I aim to keep you informed in the dynamic world of law, compliance, taxation, and much more. I ensure that you get to know our Vakilsearch expert's take on every piece of news, how it can help, and what you should do.

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