With reference to Indias 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 e

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Q: 23 (IAS/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?
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_subject: 

Economics

question_exam: 

IAS

stats: 

0,59,145,38,59,48,59

keywords: 

{'equalization tax': [0, 0, 0, 1], 'double taxation avoidance agreements': [0, 0, 0, 1], 'income tax act': [0, 0, 0, 2], 'tax credit': [0, 0, 0, 1], 'advertisement services': [0, 0, 0, 1], 'online advertisement services': [0, 0, 0, 1], 'india': [8, 1, 7, 13]}

The correct answer is option 4, "Neither 1 nor 2".

An analysis of the options given:

Option 1 states that the equalization tax was introduced as a part of the Income Tax Act. This is not correct. The equalization levy, introduced in 2016, is a distinct tax and is not a part of the Income Tax Act. It is governed by the Equalization Levy Rules, 2016.

Option 2 suggests that non-resident entities providing advertisement services in India can claim a tax credit in their home country under Double Taxation Avoidance Agreements (DTAA). This is also untrue. The equalization tax does not come under the scope of the DTAA. Hence, non-resident entities cannot claim tax credit in their home country for the equalization tax paid in India.

Therefore, both statements are false, and the correct answer is option 4, "Neither 1 nor 2".

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