Google and Facebook are required to pay a withholding tax (or equalisation levy) of 6 percent of their advertising revenues.
Google and Facebook have come under the scanner of the income tax department over underreporting of revenues from their India operations, according to a report in Business Standard.
The two companies aren’t subject to the 40 percent corporate tax charged paid by foreign companies. But such companies are required to pay a withholding tax (or equalisation levy) of 6 percent of their advertising revenues.
Moneycontrol could not independently verify the report.
"Since India operations of these companies act as resellers of their parent companies’ services, these revenues reported in India are not reflective of the actual advertisement revenues earned from users in India," an I-T official told the publication.
The Central Board of Direct Taxes (CBDT) has asked the international taxation department to examine all receipts raised by the multinational firms ad verify them against the payments made, the report said.
The I-T department is also investigating whether such service providers are deducting tax properly, the report added.
