Taxation of Personal Data Collection In India: A 'Taxing' Task

Abstract

Personal data collection is the bedrock of the economic activity of online platforms as their income earned from advertisements is directly related to the collection of personal data. Corporates that serve as online platforms and therefore, collect massive amount of personal data from Indian users can easily avoid income tax on personal data collection. The services of targeting the advertisements are technically delivered by the foreign entity controlling the platform. Further, the payment may be directly made to the foreign entity. This way, the income from advertisements is neither received in India, nor accrued in India. Therefore, this article aims at dual inquiry - first, normatively, should the collection of personal data be subject to income tax? Second, if the taxation on collection of personal data is normatively desired, how can it be justified under the existing framework of the Income Tax Act, 1961? It specifically focuses on %9(lXi) of the Act, to enquire if it provides sufficient statutory justification to deal with tax challenges posed by the data driven digital economy.