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:
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.