Akshay Aggarwal

Akshay AggarwalFinance Act 2016 had inserted Chapter VIII of Equalisation levy as per which tax shall be leviable on consideration received or receivable by a non-resident for rendering any specified service.

Specified Service’ means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government in this behalf.

Charge of Equalisation Levy: 

Equalisation levy shall be charged at the rate of 6% of the amount of consideration, for any specified service, received or receivable by a person, being a non-resident, from-

  •  A person resident in India and carrying on business or profession; or
  • A non-resident having a permanent establishment in India.

The equalisation levy shall not be charged, where-

  •  The non-resident providing the specified service has a permanent establishment in India and the specified services is effectively connected with such permanent establishment;
  • The aggregate amount of consideration does not exceed Rs. 1 Lakh; or
  • Where the payment for specified service by the person resident in India, or the permanent establishment in India is not for the purposes of carrying out business or profession.

However, vide Finance Act 2016, it has been provided that any income arising from any specified service(as defined above) shall be exempt in the hands of Non-Resident as per section 10(50) of Act.

 Compliance Requirements: 

  • Every person, being a resident and carrying on business or profession or a non-resident having a permanent establishment in India is required to deduct the equalisation levy at the rate of 6% from the amount of consideration paid or payable to a non-resident in respect of specified service (as defined above).The equalisation levy so deducted during any calendar month shall be paid by every assessee to the credit of the Central Government by the 7th day of the next month. In case of failure, simple interest at the rate of 1% for every month or part of a month shall be levied.
  • Annual statement in Form No.1, in respect of all the specified services chargeable to equalisation levy during any financial year, shall be furnished on or before the 30th June immediately following the relevant financial year (i.e., if any Equalization levy has been deducted in FY 2016-17, then the annual statement of the same has to be furnished by 30th June 2017). The statement may be furnished either electronically under Digital Signature Certificate (DSC) or through Electronic Verification Code (EVC). Where an assessee who has not furnished the statement within the time prescribed or having furnished the statement notices any omission or wrong particular therein, may furnish a statement or a revised statement, as the case may be, before the expiry of 2 years from the end of the financial year in which the specified services are provided.
  • Penalty shall be leviable in the following cases:

i. assessee fails to deduct or having deducted, fails to pay Equalisation Levy.

ii. assessee fails to furnish the statement within the time prescribed.

  • An assessee aggrieved by an order imposing penalty may appeal to Commissioner of Income Tax (Appeal) in Form No. 3 and shall be furnished electronically under Digital Signature Certificate (DSC) or through Electronic Verification Code (EVC). The assessee may, if required, further appeal to Appellate Tribunal in Form No. 4 against the order of CIT(A).
  • The amount of consideration for specified services and the amount of Equalisation levy, interest , penalty payable, and the amount of refund due (if any) shall be rounded off to the nearest multiple of ten rupees and, for this purpose any part of rupee consisting of paisa shall be ignored.

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January 2021