Equalisation Levy in Income Tax Act

As per sec 165 of Finance Act 2016 any Resident Person carrying Business or Profession or Non - Resident having Permanent Establishment in India have to deduct 6 % of Payment made for Online Advertisement or any provision of digital Advertisement space or any other facility or services for Online Advertisement purpose. Deduction of Equalisation Levy would be applicable only when aggregate payment for Online Advertisement or aggregate payment for digital space provided for Online Advertisement exceeding Rs. 1 Lakh.

Due Date of Deposit of Equalisation Levy to Government is 7th of Next Month in which levy is deducted. If any person who required to Deduct equalisation Levy but fails to deduct then such person is liable to pay Interest under sec 171 of Finance Act 2016 at the Rate of 1% per month or part of month. As per sec 171 of Finance Act 2016 any fails to Deduct equalisation Levy who is required to pay 100 % of Equalisation Levy as penalty and If such person fails to deposit after Deduction of Equalisation Levy then such person have to pay Penalty of Rs. 1000 per day during which failure continue subject to Maximum penalty up to Equalisation Levy.

Any person who is required to deduct and Deposit Equalisation Levy but fails to comply Provisions of Equalisation Levy i.e Fails to deduct or fails to deposit to Government than Expenditure on which Equalisation Levy is required to Deduct shall not be allowed as Expenditure in Current Year. If Equalisation Levy is deducted after Due date of filing of Return or Filing of Return or Deducted and Deposited in subsequent year then such Expenditure is allowed as Expenditure in year in which such Levy is paid.

As per Sec 10(50) of Income Tax Act any Income from Digital Advertising and Space provided for Digital Advertising shall exempted from Tax if such Income is Chargeable to Equalisation Levy.

Digital Advertisement :- 

Digital Advertising means Promotion of Products or Service of a Business Entity thorough Advertisement Strategy of Business Promotions in which Advertise Publish advertisement in Digital form such as Advertisement on Social Media like Facebook, Twitter, Google+, snapchat etc. Digital media is now days very popular method of advertisement due cost effective i.e more more people can be reached at lower cost. Most of Youth Generation is educated of Mobile Phone and Internet and Social media, which makes sense to Advertiser to reach more and more person at short Span of time. Advertisement of products or Services of Business entity can be done directly or through Online Advertisement Portal, Most of Advertisement Portals have their Permanent Establishment outside India. Since, Equalisation Levy is applicable due non taxability of Adsense Portal in India.

Space for Digital Advertising: -

Most of Publisher want to monetize their content. They use different types of Adsense Account beside Adsense that few ad sense publisher provide some space on their Blog or website to business entities for Advertising or promoting their products or services on website or blog. 

Residential Status under Income Tax Act 

Taxability of any Income depends on certain factors, such Income under Which Head i.e Source of Income, Place of accrue or arise and residential Status of Assessee.

Any Individual should be Treated as Ordinary Resident if he Stay in India for 182 Days or more in India in that year OR Individual stay in India for a Total period of 60 Days or more in that year and 365 Days or More in immediately Preceding 4 Years AND Individual Must be Resident for 2 Years or more out of 10 years immediately preceding relevant year and must stayed in India for 730 days or more during 7 years immediately preceding the relevant year.

Any Individual should be Treated as Resident but Not Ordinary Resident if he Stay in India for 182 Days or more in India in that year OR Individual stay in India for a Total period of 60 Days or more in that year and 365 Days or More in immediately Preceding 4 Years AND Individual Must be Non - Resident for more than 8 Years out of 10 years immediately preceding relevant year or must not stayed in India for 730 days or more during 7 years immediately preceding the relevant year.

If any Individual Does not Satisfy any conditions Out of two conditions of Resident Assessee then he is Non Resident in India.

In case of Hindu Undivided Family, Partnership Firm, Association of Persons and Body of Individuals treated as Resident where Wholly or Partially Control of Management is in India During Relevant Previous Year. Hindu Undivided Family can treated as Resident Not Ordinary if Karta of Hindu Undivided Family Stay in India for 182 Days or more in India in that year OR Karta of Hindu Undivided Family stay in India for a Total period of 60 Days or more in that year and 365 Days or More in immediately Preceding 4 Years AND Karta of Hindu Undivided Family Must be Non - Resident for more than 8 Years out of 10 years immediately preceding relevant year or must not stayed in India for 730 days or more during 7 years immediately preceding the relevant year.

Any Company registered in India shall be always Treated as Resident whereas any Company other than Indian Company having its Place of Effective Management in India then it shall be treated as Resident Assessee otherwise such company shall be treated as Non - Resident.

Any Income from or through any Business Connection in India shall be deemed to be Accrue or arise in India. Any income from or through any Property in India shall be deemed to be accrue or arises in India. Any Income from or through transfer of any Capital Assets located in India shall be deemed to accrue or arise in India. Any Income from or through any Assets or any source of Income in India shall be deemed to be accrue or arise in India.

Any Asset being any Share or Interest in Any Company or Entity registered or incorporated outside India shall be deemed to be situated in India if Value of such Share or Interest derived directly or Indirectly from Assets Located in India. Substantially means Value of such assets should be more than Rs. 10 crore and such assets represents at least 50% of the value or Total Assets of entity.