31.9 C
Delhi
Tuesday, July 7, 2020

FM announced removal of dividend distribution tax (DDT)

- Advertisement -

FM announced removal of dividend distribution tax (DDT)New Delhi, Feb 1 (IANS) In a relief to companies and a boost to equity markets, Finance Minister Nirmala Sitharaman on Saturday announced the removal of dividend distribution tax (DDT) and now tax will be paid only by the recipients, a move that will cost the exchequer Rs 25,000 crore.

Currently, companies are required to pay DDT on the dividend paid to shareholders at the rate of 15% plus applicable surcharge and cess in addition to the tax payable by the company on its profits.

Sitharaman said in the Budget speech that it has been argued that the system of levying DDT results in increase in tax burden for investors and especially those who are liable to pay tax less than the rate of DDT if the dividend amount is included in their income.

Further, non-availability of credit of DDT to most of the foreign investors in their home country results in reduction of rate of return on equity capital for them.

“In order to increase the attractiveness of the Indian Equity Market and to provide relief to a large class of investors, I propose to remove the DDT and adopt the classical system of dividend taxation under which the companies would not be required to pay DDT. The dividend shall be taxed only in the hands of the recipients at their applicable rate”, Sitharaman announced.

“Further, in order to remove the cascading effect, I also propose to allow deduction for the dividend received by a holding company from its subsidiary”, she added. The removal of DDT will lead to estimated annual revenue forgone of Rs 25,000 crore. This is another bold move which will further make India an attractive destination for investment, the Finance Minister added.

Archit Gupta, Founder, and CEO, ClearTax said, “DDT removal is good as it increases dividends received in the hands of the taxpayer – however, such receipts to now are taxable in their hands. Those above 20% tax slab – will now face more tax on their dividend income”, he added.

MNCs and public sector undertakings are expected to benefit from the DDT removal as they are high dividend paying companies.

The DDT was introduced to enhance tax collections as under the dividend tax, individuals were hardly paying taxes and making disclosures on tax.

–IANS

Follow Us For Latest Updates -

India Updates
India Updates is an independent news & Information website. Follow us for regular updates on News and Information.

Related News

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Trending Topics

Covid 19 India Updates

World Bank signed $750 million agreement with India to support MSMEs

The Finance Ministry stated that the central government and World bank has signed an agreement worth $750million to boost MSME(Micro, Small and medium enterprises)...

Trending Right Now

Pan-India hotel occupancy rate may hit multi-year low: ICRA

New Delhi, July 6 (IANS) Ratings agency ICRA expects pan-India hotel occupancy rate to hit a multi-year low in FY2021.According to ICRA''s sector report,...