Question
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:
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Answer:
D
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Explanation:
Statement 1 is incorrect. The equalization tax of 6% on online advertisement services offered by non-resident entities in India is not introduced as a part of the Income Tax Act. It is a separate tax provision or measure introduced by the Indian government.
Statement 2 is incorrect. Non-resident entities offering advertisement services in India cannot claim a tax credit in their home country under the 'Double Taxation Avoidance Agreements' (DTAA) specifically for this equalization tax. The tax credit provisions under DTAA generally apply to income taxes and not to specific taxes like the equalization tax.