June 28 (Reuters) - The United States and India have

extended a standstill agreement on U.S. retaliation over India's

digital-services tax until Sunday, aligning it with a

fast-approaching deadline for a global deal to reallocate taxing

rights on the world's biggest and most profitable companies, the

U.S. Treasury said on Friday.

In a brief announcement, the Treasury said that a November

2021 political compromise that expired March 31 would be

extended through the end of the month, as negotiations on the

"Pillar 1" tax agreement continue.

The Pillar 1 deal is in danger of collapse, as the U.S.,

India and China have failed to agree on key elements of the deal

related to calculation of transfer pricing to help determine

local tax liabilities.

The stakes of the last-minute negotiations are high. The

deal's failure could prompt several countries to reinstate their

taxes on U.S. tech giants such as Apple ( AAPL ), Alphabet's

Google, and Amazon.com ( AMZN ) and risk punitive

duties on billions of dollars in exports to the U.S.

The extension of the U.S.-India agreement also aligns it

with the expiration of similar deals with six other countries

that had enacted digital-services taxes: Austria, Britain,

France, Italy, Spain and Turkey.

These countries suspended their digital-services taxes

shortly after a two-pillar tax deal was struck in October 2021

by nearly 140 countries to impose a 15% global minimum corporate

income tax and complete negotiation on reallocating some taxing

rights on large multinationals to countries where they sell

goods and services. This was meant to replace the

digital-services taxes.

At the same time, the U.S. Trade Representative's office

agreed to suspend planned trade retaliation against the digital

taxes while negotiations were completed.

U.S. negotiations are being led by the Treasury, where a

spokesperson declined to comment on the state of negotiations.

A USTR spokesperson also declined to comment on next steps,

but added: "As we've said previously, we oppose digital-services

taxes that unfairly target U.S. companies and the OECD/G20

Inclusive Framework negotiations offer the best path to address

the challenges that digitalization of the economy poses to the

international tax system."

Treasury Secretary Janet Yellen told Reuters at a G7 finance

meeting in May that India and China were hindering agreement on

the alternative transfer-pricing mechanism known as "Amount B,"

but that talks were continuing.

Italy's finance minister also blamed the U.S. demands for

the inability to agree on terms. Italy is seeking an extension

of the U.S. standstill agreement and sources told Reuters

earlier on Friday that Italy has asked Google to pay $1 billion

in unpaid taxes.