DDT saves signatures, sprays investors
The movement to abolish distribution tax , which was payable for India Inc , and tax ing dividends in the hands of all shareholders, won’t hurt those who enjoy tax -free up to Rs 5 lakh. However, it will pinch the pocket of rich shareholders. Dividends paid on and after April 1, 2020, will be tax ed in the hands of at their applicable rate.
At present, shareholders earning dividend income of Rs 10 lakh or plus have to bear a tax of 10% on such income, plus the applicable surcharge and cess. The dividend, no matter the quantum, is tax -free in the hands of foreign shareholders (but they don’t get a tax credit in their home country on the underlying tax ).
Under the Budget proposals, a rich shareholder will find that against a tax rate of 10% on dividend income, the dividend gets added to his tax able income and is tax ed at the applicable slab rate.
A person with a tax able income of between Rs 50 lakh and Rs 1 crore is subject to a tax rate of 34.32%.