Equalization levy & TDS

1. Its not just TDS, but tax over the service charges paid to foreign entity.

Equalization Levy is a direct tax, which is withheld at the time of payment by the service recipient. The two conditions to be met to be liable to equalization levy:

• The payment should be made to a non-resident service provider;
• The annual payment made to one service provider exceeds Rs. 1,00,000 in one financial year.

The combination of inadequacy of physical presence based nexus rules in the tax treaties and the possibility of taxing such payments as royalty or fee for technical services over  online advertisement  and digital advertising space or facilities/ services  created a fertile ground for tax disputes, hence Equalization levy.