Section 10(50)

Section 10(50) — the law in short

What the courts have decided on section 10(50), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Coursera Inc v. Income Tax Officer TDS 1(2)(1) — a s.197 order that ignored the 2021 amendment to s.10(50) was set aside, and the receipts exigible to equalisation levy must be excluded before the withholding rate is fixed High CourtHelps taxpayerNo later treatment found
  My non-resident client pays equalisation levy on its Indian receipts, and the Assessing Officer has still refused a NIL section 197 certificate and directed ten per cent withholding. What is the answer?
  The Delhi High Court set that order aside. The equalisation levy is charged by Chapter VIII of the Finance Act, 2016, not by the Income-tax Act; the join between the two statutes is section 10(50) of the Act, and the Finance Act 2021 amended that clause with effect from 1 April 2021 so that amounts taxable as royalty or fees for technical services under the Act read with the applicable treaty are excluded from the exemption. The Court held that the impugned order did not take that amendment into account, and gave no reasoning for the ten per cent rate at all — the officer's own file had recorded that the receipts were not royalty or fees for technical services under the India-US treaty and had recommended four per cent 'in the interest of Revenue'. The order was set aside with a direction to pass a de novo reasoned order within four weeks excluding, from the receipts subject to withholding, so much as is exigible to equalisation levy.
• Acronis Asia Pte Ltd v. DCIT — distribution revenue was not fees for technical services, a Singapore resident cannot be tested under the India-Switzerland treaty, and the s.10(50) exemption follows once Explanation 1 does not bite ITATHelps taxpayerNo later treatment found
  My client paid two per cent equalisation levy on its Indian receipts and the department has still assessed the same receipts as fees for technical services and denied s.10(50). In what order should the argument be run?
  Characterisation first, exemption second. The equalisation levy is charged by Chapter VIII of the Finance Act, 2016 and not by the Income-tax Act; the Act's only point of contact is section 10(50), whose Explanation 1 takes out of the exemption income chargeable as royalty or fees for technical services under the Act read with a treaty. The ITAT Mumbai held that a Singapore limited-risk distributor's revenue from Indian sub-distributors was not fees for technical services — it rendered no service, owned no intellectual property and made nothing available — and that the Dispute Resolution Panel could not test a Singapore resident under the India-Switzerland treaty merely because the group's software and intellectual property sat in Switzerland. Having so held, the Tribunal held that the bar in Explanation 1 to section 10(50) did not come into operation and the assessee was entitled to the exclusion, subject to verification of payment of the levy.
• Statutory position — s.9(1)(i) Explanation 2A: significant economic presence, the Rule 11UD thresholds of two crore rupees and three lakh users, its commencement from AY 2022-23, and why it does not by itself create a treaty permanent establishment CBDT Circulars & InstructionsCuts both ways
  The Assessing Officer says my non-resident client has a significant economic presence in India and therefore a business connection. From which year does that provision actually operate, what are the thresholds, and does it override the treaty?
  Significant economic presence is a DOMESTIC-LAW expansion of 'business connection' in section 9(1)(i) of the Income-tax Act. It has nothing to do with the equalisation levy, which is charged by Chapter VIII of the Finance Act, 2016 and is not in the Income-tax Act at all. Explanation 2A in its present form was inserted by the Finance Act 2020 with effect from 1 April 2022, and it has two limbs: (a) transactions in goods, services or property with any person in India, including provision of download of data or software in India, where the aggregate of payments in the previous year exceeds a prescribed amount; and (b) systematic and continuous soliciting of business activities, or engaging in interaction, with a prescribed number of users in India. Rule 11UD prescribes both: TWO CRORE RUPEES and THREE LAKH USERS. Rule 11UD was inserted by the Income-tax (Thirteenth Amendment) Rules, 2021 with effect from 1 April 2022. And Explanation 2A does not by itself create a permanent establishment: it enlarges a domestic deeming provision, it does not amend any treaty, and where a treaty applies, section 90(2) allows the assessee the more beneficial position, so business profits remain taxable only if there is a permanent establishment as the treaty's own Article 5 defines it.
• Statutory position — s.165A of the Finance Act, 2016: the two per cent levy on e-commerce supply or services, the two crore threshold, the specified circumstances, and the 1 August 2024 cut-off CBDT Circulars & InstructionsCuts both ways
  A foreign platform sold to Indian customers. Was it liable to the two per cent equalisation levy on its own receipts, what was the threshold, and when did that levy end?
  The two per cent levy is charged by section 165A of the Finance Act, 2016 — again, not by the Income-tax Act. It was inserted with effect from 1 April 2020 and charges two per cent of the consideration received or receivable by a NON-RESIDENT e-commerce operator from e-commerce supply or services made or provided or facilitated by it to a person resident in India, to a non-resident in the 'specified circumstances', or to a person who buys using an internet protocol address located in India. It is not charged where the operator has an Indian permanent establishment with which the supply is effectively connected, where the six per cent levy under section 165 is leviable, or where the operator's sales, turnover or gross receipts from e-commerce supply or services are less than TWO CRORE RUPEES during the previous year. Sub-section (4) ends the charge: it does not apply to consideration received or receivable on or after 1 AUGUST 2024.
• Statutory position — s.165 of the Finance Act, 2016: the six per cent equalisation levy on online advertisement, the one lakh rupee threshold, the three exclusions, and the 1 April 2025 cut-off CBDT Circulars & InstructionsCuts both ways
  My client paid a foreign platform for online advertising. Was it required to withhold six per cent equalisation levy, what was the threshold below which it was not, and from when did that levy stop?
  The six per cent levy is charged by section 165 of the Finance Act, 2016 — it is not in the Income-tax Act, and a reader who looks for it there will not find it. It is charged on the amount of consideration for any specified service received or receivable by a NON-RESIDENT from (i) a person resident in India carrying on business or profession, or (ii) a non-resident having a permanent establishment in India. It is not charged in three cases: where the non-resident providing the service has a permanent establishment in India and the service is effectively connected with it; where the aggregate consideration for specified service received or receivable in a previous year by that non-resident from that payer does not exceed ONE LAKH RUPEES; and where the payment is not for the purposes of carrying on business or profession. Sub-section (3) ends the charge: it does not apply to any consideration for any specified service received or receivable by a person on or after 1 April 2025.
• Statutory position — the equalisation levy is charged by Chapter VIII of the Finance Act, 2016 and not by the Income-tax Act: what the Chapter contains, when it commenced, and the two different dates on which the two levies stopped CBDT Circulars & InstructionsCuts both ways
  A notice has come in demanding equalisation levy, and I cannot find the levy anywhere in the Income-tax Act. Which statute is it actually in, what machinery governs assessment and appeal, and has it not been abolished?
  The equalisation levy is not in the Income-tax Act, 1961 at all. It is charged by Chapter VIII of the Finance Act, 2016 (Act 28 of 2016), which is a self-contained code running from section 163 to section 180 with its own extent and commencement provision, its own definitions, two charging sections, its own collection, statement, assessment, rectification, interest, penalty and appeal provisions, its own rule-making power and its own removal-of-difficulties power. Chapter VIII came into force on 1 June 2016, that date having been appointed by Notification No. S.O. 1904(E) dated 27 May 2016 issued under sub-section (2) of section 163, and the Equalisation levy Rules, 2016 were notified the same day by S.O. 1905(E) under sub-section (3) of section 179. Both levies have since been switched off, on DIFFERENT dates: the two per cent levy on e-commerce supply or services does not apply to consideration received or receivable by an e-commerce operator on or after 1 August 2024 (section 165A(4)), and the six per cent levy on specified services does not apply to consideration for specified service received or receivable on or after 1 April 2025 (section 165(3)).
• Statutory position — s.10(50) of the Income-tax Act: the exemption for income already subjected to equalisation levy, the royalty and fees-for-technical-services carve-out, and the two dates that close it CBDT Circulars & InstructionsCuts both ways
  My client paid equalisation levy on the same receipts the Assessing Officer is now taxing as income. Is there an exemption, and has the department any answer to it?
  There is, and it is the only place in the Income-tax Act where the equalisation levy — which is charged by Chapter VIII of the Finance Act, 2016 and not by the Income-tax Act — meets income-tax. Section 10(50) excludes from total income any income arising from (i) a specified service provided on or after the date on which Chapter VIII of the Finance Act, 2016 came into force, or (ii) e-commerce supply or services made or provided or facilitated on or after 1 April 2020 BUT BEFORE 1 AUGUST 2024, and chargeable to equalisation levy under that Chapter. Two limits close it. Explanation 1 says the income referred to in the clause 'shall not include and shall be deemed never to have been included' any income chargeable to tax as royalty or fees for technical services in India under the Act read with a section 90 or 90A agreement. And the proviso says the clause does not apply to any income of the previous year relevant to the assessment year beginning on or after 1 April 2026 — that is, from AY 2026-27 onwards.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.