Finance Bill 2025 Amendments: Government Proposes Removal of 6% Equalisation Levy on Online Advertising

The government has proposed removing the 6% equalisation levy on online advertising as part of the amendments to the Finance Bill 2025, according to sources familiar with the matter.

This move followed the removal of the 2% equalisation levy on e-commerce last year, a point of contention between India and the United States. The US had threatened to impose reciprocal tariffs starting April 2, citing concerns over India's digital tax policies.

“While this change may reduce friction in global trade relations, it remains to be seen whether this, combined with other diplomatic measures, will lead to a softening of the US's stance on India's digital tax policies,” said AKM Global's Tax Partner Amit Maheshwari. He added that the decision signalled a more accommodative approach to global tax disputes, which could benefit Indian businesses operating in the digital sector.

The amendments to the Finance Bill 2025 include 35 changes, one of which revises Section 9A, which governs the tax treatment of offshore fund managers in India, the people familiar with the matter told NDTV Profit on the condition of anonymity.

The revision eases compliance requirements by removing the condition that no more than 5% of a fund's corpus be indirectly owned by Indian residents. This change simplifies regulatory compliance for offshore fund managers and restores the central government's authority to modify these conditions through notifications.

Another key amendment is to Section 143(1), which deals with the processing of income tax returns. A new sub-clause (iia) has been introduced, allowing tax authorities to adjust returns if discrepancies are found when comparing the current year's filing with the previous year's data. This means tax authorities will conduct a year-over-year reconciliation, requiring taxpayers to maintain consistency in their filings to avoid scrutiny.

The amendments also address search and seizure provisions. The Finance Act 2024 used the term “total income” in search and seizure cases, leading to concerns that disclosed income could also be subjected to penalties. The Finance Bill 2025 clarifies this by replacing the term with “Total Undisclosed Income,” ensuring that only unreported earnings will be targeted.

These amendments provide more clarity in tax regulations and could enhance India's appeal as a destination for foreign investments, particularly in the asset management sector.