Is equalisation levy still payable in India in 2026?

Equalisation levy was a tax on certain digital transactions with non-residents. It was not part of the Income-tax Act: it sat in Chapter VIII of the Finance Act, 2016.³ It came in two forms, often called the online advertising levy and the e-commerce levy. Both have now been switched off for new transactions, but many web pages still describe them as live.

For most Indian service exporters, such as a freelance designer or a consultant, the levy never applied to their own fees. It mattered mainly to Indian businesses that bought online advertising from foreign platforms, such as a digital marketing agency running ads for clients. This page sets out the status as of October 2026 from the Finance Act texts.¹²

What is the equalisation levy?

The equalisation levy is a charge on consideration paid to non-residents for specified digital services, introduced by the Finance Act, 2016.³

• Rate: the Finance Bill, 2016 proposed a levy of six per cent of the consideration for any "specified service" received by a non-resident from a person resident in India carrying on business or profession, or from a non-resident with a permanent establishment in India.³
• Specified service: online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement, and any other service the Central Government notified.³
• Threshold: the Indian payer deducted the levy from the payment, but only if the aggregate consideration to that non-resident in a year exceeded one lakh rupees.³
• E-commerce levy: a later provision, section 165A, added a levy on consideration received by an e-commerce operator for e-commerce supply or services made or provided or facilitated from 1 April 2020.²

Both levies are now switched off for new transactions.¹²

Who does the equalisation levy apply to?

The equalisation levy applied to Indian businesses paying non-residents for online advertising, and to e-commerce operators, and never to an Indian service exporter's own fees.³²

For example, an Indian video editor paid by a US client, or an Indian SaaS company selling subscriptions abroad, was never the person liable.

How do you deal with equalisation levy in 2026?

You deal with equalisation levy in 2026 by checking whether your business ever paid foreign platforms for online advertising, since only that side was ever affected.¹³

1. Exporters only: if you only sell services abroad, there is nothing to do for equalisation levy.
2. Past ad spend: if your business bought online ads from foreign platforms before 1 April 2025, check with your accountant that any levy deducted for those periods was deposited and reported.¹
3. Current ad spend: for payments from 1 April 2025, do not deduct the online advertisement levy.¹
4. GST: review GST reverse charge separately; see reverse charge on imported services and SaaS tools.

What dates apply to the equalisation levy?

The dates that apply to the equalisation levy are 1 April 2025 for the online advertisement levy and a proposed 1 August 2024 for the e-commerce levy.¹²

Is the online advertisement equalisation levy still payable?

The online advertisement equalisation levy is not payable for new transactions, because section 146 of the Finance Act, 2025 amended the Finance Act, 2016 with effect from 1 April 2025.¹

• Section 163(3)(a): now limits the chapter's application to specified services provided on or after its commencement "but before the 1st day of April, 2025".¹
• Section 165(3): says section 165 does not apply to any consideration for any specified service received or receivable by a person on or after 1 April 2025.¹

So an Indian agency paying a foreign platform for ads from 1 April 2025 onwards does not deduct the levy on those payments.¹

Is the e-commerce equalisation levy under section 165A still payable?

The e-commerce equalisation levy was proposed to stop from 1 August 2024. Clause 157 of the Finance (No. 2) Bill, 2024, as introduced, proposed that section 165A not apply to consideration received or receivable by an e-commerce operator from e-commerce supply or services made, provided or facilitated on or after 1 August 2024, and that section 163(3) cover e-commerce supply or services only "before the 1st day of August, 2024".² The Finance Act, 2025 then amended clause (a) of section 163(3) in a way that matches the sub-section proposed in that Bill.¹²

Note: We could not open the enacted text of the Finance (No. 2) Act, 2024 for this page, so the 1 August 2024 date is cited from the Bill as introduced. Confirm against the Act or with your chartered accountant before relying on it for a past period.²

What happened to the income-tax exemption linked to the equalisation levy?

The income-tax exemption linked to the equalisation levy was also switched off. Section 10(50) of the Income-tax Act, 1961 exempted income on which equalisation levy was charged, and section 6 of the Finance Act, 2025 inserted a proviso so that clause (50) does not apply to income of the previous year relevant to the assessment year beginning on or after 1 April 2026.¹ The Income-tax Act, 2025, which applies from tax year 2026-27, contains no equalisation levy provisions.⁴

How was the online advertisement equalisation levy calculated?

The online advertisement equalisation levy was calculated at six per cent of the consideration for the specified service, deducted by the Indian payer once the year's aggregate consideration to that non-resident exceeded one lakh rupees, as the Finance Bill, 2016 set out.³

• For example: say an Indian agency paid a foreign ad platform ₹2,00,000 in a year before April 2025. The aggregate is above one lakh rupees, so the levy at six per cent is ₹12,000.³
• Below the threshold: an agency that paid the same platform ₹80,000 in a year deducted nothing.³
• From 1 April 2025: the same payment attracts no levy.¹

These figures are a worked illustration of the Bill's rate and threshold.

What are the common mistakes with the equalisation levy?

The common mistakes with the equalisation levy come from older guides and invoices that still describe it as live.¹

• Still deducting: deducting six per cent on foreign ad payments made from 1 April 2025.¹
• Applying it to exports: treating an Indian exporter's own fees as subject to the levy.³²
• Forgetting past periods: assuming the 2025 change cancelled obligations for earlier periods.¹
• Looking in the wrong Act: searching the Income-tax Act for the levy. It sat in the Finance Act, 2016.³
• Mixing it with GST: assuming the end of the levy also ends GST reverse charge on imported services.

Treat the Finance Act text, not the invoice wording, as the reference.