I just tested this out (using iTunes version 12.3.2.35 on both Windows & Mac OS). Unfortunately, I cannot comment on iTunes Match Subscriptions because I do not subscribe.
There is a difference between "purchased content" (i.e. media that originated from iTunes and is therefore available for re-download) vs. media that I've obtained outside of iTunes which I've manually added to iTunes: the "Remove Download" option only exists with purchased content.
If you wish to test this out for yourself, I suggest that you choose to "Show iCloud Music/Movie/TV Show Purchases" from the View menu. [If this option is already activated, the menu option will be to "Hide iCloud ___ Purchases". (The ____ means either Music, Movie, or TV Show.)] Also, be sure to have the "iCloud Download" column showing in your Songs list, Movies list or TV Show list. The iCloud Download column is sortable just like Name, Artist, Album, Genre, etc. If you want to distinguish between (a) content purchased from iTunes, and (b) your own content not purchased from iTunes, you may show the "Purchase Date" column in the Song/Movie/TV Show list — a purchase date will show in the column if applicable. Check out the Help files to read more... About iCloud Music Library icons and status - Apple Support
Remove Download:
This menu option exists only with purchased content. Choosing this removed the file from my hard disk drive (HDD) immediately without moving the file to the Trash/Recycle Bin. (If you have chosen to "Show iCloud Purchases", the track will remain visibly listed and a cloud icon will appear in the iCloud Download column.)
Delete:
- If you're deleting a song that you've obtained from iTunes, the first dialog that appears asks you to confirm that you wish to "Delete Song" with an optional check-box to "Also hide this song" (more on what "hide" means later). The description mentions that "this song can still be played" meaning that you can still play the full song if you're connected to the internet and it will stream the entire song for you.
- A second dialog box (or this will be only dialog box if you are deleting a song that isn't from iTunes) prompts to "Move to Recycle Bin/Trash" or "Keep File". Choosing "Move to Recycle Bin/Trash" does just that (but a note in the dialog box mentions that "Only files in the iTunes Media folder will be moved to the Recycle Bin"); choosing "Keep File" results in the file remaining where its located on the HDD while disassociating (i.e. removing) the song/track from iTunes—if you wish to have the song play/appear in iTunes once again, browse/navigate to the file in the HDD/Windows Explorer/Finder and open it with iTunes.
- The dialog boxes are only slightly different for Movies and TV Shows.
After choosing to either Remove Download or Delete, and if the track is available as an iCloud Download (because it originated from iTunes), it still appears in my playlist with the iCloud Download icon visible (because in the View menu, I have chosen to show iCloud purchases).
Hide:
- If you attempt to "Delete" an iCloud-Downloadable track again that you've already deleted (or already does not exist locally on your HDD) — this time you're actually choosing to "Hide" it from your list of purchases. A dialog box says, "Are you sure you want to hide this song?" Hidden content can be unhidden and shown in your lists again (and downloaded again if you wish); you need to access your "Account Info" to unhide content.
- More about hidden content here: Hide and unhide purchases in iTunes or iBooks on your Mac or PC - Apple Support