Finance Minister Nirmala Sitharaman has proposed the shifting of Dividend Distribution Tax (DDT) to individuals instead of companies in Budget 2020. "To make Indian equity markets more competitive, companies will no more pay dividend distribution tax (DDT); it will be taxed in the hands of the receipent," FM stated on Saturday.
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Dividend Distribution Tax (DDT) is the tax levied on dividends distributed by the companies from its profits. Currently, a company pays income tax on its taxable profit. Thereafter, when it distributes the surplus profit to shareholders it needs to pay DDT at 20.56%. Further, tax payers also needs to pay additional tax at 10% (plus applicable surcharge and cess) on dividend above ₹10 lakh.
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The withdrawal of the DDT will remove the cascading impact of taxation. The abolition of DDT will eventually result in high investments in profit-making companies and higher distribution of dividends.
