Definition
Equalisation Levy (Google Tax)
The equalisation levy is a tax on certain payments to non-resident digital companies, aimed at taxing income that escapes India's traditional tax net.
Foreign digital firms can earn substantial revenue from Indian users without a physical presence that would let India tax their profits. The equalisation levy, popularly the 'Google tax', was introduced to capture part of this value — initially on online advertising payments to non-residents and later expanded to certain e-commerce supplies.
The levy is collected at source and sits outside the regular income-tax framework, which is why it does not interact with DTAA relief in the usual way. Its scope has been contentious internationally and is linked to the broader global negotiations on taxing the digital economy.
Related terms
- DTAA (Double Taxation Avoidance)A Double Taxation Avoidance Agreement is a treaty between two countries that prevents the same income from being taxed twice and allocates taxing rights between them.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.