Government Withdraws 2% Digital Tax on Overseas E-Commerce Supplies

The government announced the withdrawal of the 2 per cent equalisation levy on overseas e-commerce supplies, effective August 1, 2024. The decision aligns with ongoing global tax negotiations. Finance Minister Nirmala Sitharaman also detailed changes in the FY25 Budget aimed at providing tax relief for salaried employees and pensioners.

The government announced on Tuesday the withdrawal of the 2 per cent equalisation levy, also known as the digital tax, on overseas e-commerce supplies effective from August 1, 2024.

This decision is part of ongoing negotiations related to the Pillar 1 and Pillar 2 global tax frameworks, Finance Minister Nirmala Sitharaman explained in a post-budget briefing. The proposed global minimum tax of 15 per cent is set to come into effect next year, impacting almost 90 per cent of multinational corporations (MNCs) with revenues over 750 million euros by 2025.

Presenting the Budget for 2024-25 in the Lok Sabha, Sitharaman also announced several tax relief measures, including an increase in the standard deduction for salaried employees from Rs 50,000 to Rs 75,000 and a hike in the National Pension System (NPS) contribution limit from 10 per cent to 14 per cent. Furthermore, tax deductions on family pensions will be increased to Rs 25,000 from Rs 15,000. These changes are expected to save salaried employees up to Rs 17,500 annually in taxes.