Google Tax

Learn about Google Tax, its meaning, applicability, and how it works under India's Equalisation Levy.

4 min

24-December-2025

Digital businesses don’t need a physical office in India to earn from Indian users anymore. And that’s exactly where Google Tax, officially called the Equalisation Levy, comes in.

Introduced in 2016, this tax ensures that foreign digital service providers—earning revenue from Indian businesses and consumers—pay their fair share of taxes in India. The levy primarily applies to non-resident companies offering digital services without a permanent establishment in the country.

Initially focused on online advertising, the scope of the tax expanded in 2020 to include e-commerce transactions as well. The goal is simple: prevent tax leakage, improve transparency, and maintain fair competition between Indian and foreign digital players.

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Key takeaways

Introduced in 2016 – The Google Tax, or Equalisation Levy, applies to specified digital services provided by non-resident companies.
Covers digital transactions – Includes online advertising, digital platforms, and e-commerce services.
6% and 2% levy – A 6% tax applies to online advertising payments, while a 2% levy applies to revenue earned by foreign e-commerce operators from Indian users.
Aims to prevent tax avoidance – Ensures foreign digital businesses contribute to India’s tax base despite lacking a physical presence.

Understanding how such levies work helps businesses plan cash flows better—and helps individuals appreciate the value of stable, regulation-light investment options.

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Is Google tax mandatory

Yes. The Equalisation Levy is mandatory under Indian tax laws.

If an Indian business or entity pays more than Rs.1,00,000 in a financial year to a non-resident company for digital advertising or specified online services, the 6% levy must be deducted before payment.

For e-commerce transactions, the 2% levy is charged directly on the foreign company’s revenue earned from Indian users.

Failure to comply can lead to:

Interest on delayed payments
Monetary penalties
Additional compliance scrutiny

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Expected effect of Google Tax

The Google Tax has reshaped the digital ecosystem in multiple ways.

For foreign digital companies, the levy increases the cost of operating in India. Several global platforms have either absorbed the cost or passed it on to advertisers, resulting in higher ad prices.

For Indian businesses, especially startups and digital-first brands, marketing budgets have come under pressure. The obligation to deduct the 6% levy directly impacts campaign costs. Similarly, the 2% levy affects pricing strategies of foreign e-commerce platforms serving Indian consumers.

From a policy standpoint, the levy:

Reduces tax avoidance by global tech giants
Ensures revenue generated from Indian users is taxed domestically
Creates a more level playing field for Indian digital companies

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Also Read: Tax Expense

Conclusion

The Google Tax, or Equalisation Levy, is a critical step in India’s effort to tax the digital economy fairly. By bringing foreign digital service providers under the tax net, it reduces revenue leakage and promotes equitable competition.

While the levy has increased digital advertising and e-commerce costs, it has also strengthened India’s tax framework for a rapidly evolving online economy. As regulations continue to change, financial clarity—both for businesses and individuals—becomes increasingly important.

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Frequently asked questions

The Google Tax refers to the Equalisation Levy, introduced in India in 2016. It applies to digital advertising and e-commerce transactions involving non-resident companies. This tax ensures that foreign digital businesses earning revenue from Indian users contribute their fair share to the Indian tax system, preventing tax avoidance.

The Google Tax, officially called the Equalisation Levy, is a tax on digital transactions by foreign companies without a physical presence in India. It includes a 6% levy on digital advertising payments and a 2% levy on e-commerce revenue earned from Indian users, ensuring fair taxation of cross-border digital services.

The tax rate for the Google Tax (Equalisation Levy) depends on the type of transaction. A 6% levy applies to payments for digital advertising services, while a 2% levy is imposed on foreign e-commerce companies earning revenue from Indian customers. These rates help regulate taxation on digital services provided by non-resident entities.

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As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or referhttps://www.bajajfinserv.in/fixed-deposit-archivesThe company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

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Google Tax

Fixed Deposit

Key takeaways

Is Google tax mandatory