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:
Explanation
In 2016, India introduced a 6% Equalization Levy targeting income from online advertisement services provided by non-resident entities to Indian businesses. This measure aimed to tax digital transactions and level the playing field between domestic and foreign service providers. In 2020 it was expanded to include a 2% levy on e-commerce transactions by non-resident operators.
Statement 1 is incorrect: The Equalization Levy was introduced through the Finance Act, 2016 as a separate chapter and is not part of the Income Tax Act. This distinction ensures that the levy operates independently of the existing income tax framework.
Statement 2 is incorrect: Non-resident entities cannot claim a tax credit for this levy in their home countries which can potentially lead to double taxation. It doesn’t fall within the scope of Double Taxation Avoidance Agreements (DTAAs). Its exclusion from the Income Tax Act raises challenges regarding international tax credits and potential double taxation for foreign entities.