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equalisation

Equalisation Levy

1.Introduction
Equalisation Levy was introduced in India in 2016, via, Chapter VIII OF THE FINANCE ACT 2016. This act is applicable to the whole India except J&K. The main reason for introducing this section to impose a tax on google who generate revenue of Rs. 4108 in 2014-15 and Facebook also generate Rs. 123.5 crores during the same period which was not taxed earlier. Due to this govt. will collect a higher amount of Tax.

2.Applicability of Equalisation Levy
Equalisation Levy will be charged only when the below two conditions will be satisfied.
a. The payment should be made to non-resident service providers and
b. The annual payment made to one service provider exceed Rs.1,00,000 in one financial year

3.Charge of Equalisation Levy
As per section 165 of Income-tax act equalisation Levy will be charged @6% of the amount of consideration for any service received by the service receiver from the service provider subject to-
such a person is a non-resident Indian.
Example:

Ramparsad Yadav has advertised on Facebook to expand his business. He has to pay Rs. 2,00,000 in FY 2017-18 to Facebook for the advertising services availed.

Solution:

Facebook will bill Ramparsad Yadav for an amount of Rs. 2,00,000/-

Ramparsad Yadav will deduct TDS at the rate of 6% of Rs. 2,12,765.9 = Rs. 12,765.9 and pay the balance of Rs. 2,00,000 ( Rs. 2,12,765.9 – Rs. 12,765.9) to Facebook and deposit the tax amount before 7th of the next month by using challan 285.

4.Collection and payment of Equalisation Levy
As per section 166 of Income-tax act equalisation levy deducted during any calendar month is to be paid by the seventh (7th) of the month immediately following the calendar month by using the challan no. 285.

5.Furnishing of annual return/statement of specified services
As per section 167 of Income-tax act statement of specified service is required to be furnished electronically in FORM NO.1 (verified through either a digital signature or an electronic verification code by an authorized signatory) on or before 30 June immediately following that financial year. The Tax Officer has been empowered to issue a notice for furnishing such a statement, which then has to be furnished within 30 days from the date of serving of such notice, where the same is not filed within the prescribed timeline

6.Interest on delay payment of equalisation levy
As per section 170 every assesses who fails to deposit the tax shall be liable to pay interest @ 1% per month or part of the month.

7.Penalty for not- filing of Levy return
Every assessee who fails to furnish the statement within the time prescribed u/s 167, he shall be liable to pay a penalty of 100 per day during which the failure continues.
Disallowance of expense
In case the tax does not deposit then the amount of expenditure shall be disallowed in the hand of the payer(unless the defect is rectified).

Prosecution
If the false statement has been filed the person may be subject to imprisonment for a period of 3 years and a fine.

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