With reference to India's decision to levy an equalization tax of 6% on online advertisement services offered by non-resident entities, which of the following statements is/are correct? 1. It is introduced as a part of the Income Tax Act. 2. Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the "Double Taxation Avoidance Agreements". Select the correct answer using the code given below:

QUESTION

Hard

Economy

Prelims 2018

With reference to India's decision to levy an equalization tax of 6% on online advertisement services offered by non-resident entities, which of the following statements is/are correct?

It is introduced as a part of the Income Tax Act.
Non-resident entities that offer advertisement services in India can claim a tax credit in their home country under the "Double Taxation Avoidance Agreements".

Select the correct answer using the code given below:

Select an option to attempt

Explanation

The equalization levy on online advertisement services offered by non-resident entities is introduced as a separate tax under the Finance Act, not as a part of the Income Tax Act.

Non-resident entities cannot claim a tax credit in their home country under the "Double Taxation Avoidance Agreements" because the equalization levy is not an income tax. It is a separate tax levied on specified services provided by non-residents to residents.

Hence, option A is the correct answer.

Note: The Indian government has abolished the 6% Equalization Levy on online advertisements, with effective from April 1, 2025.

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