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Removal of DDT will boost investments: CBDT
Why is it in the news?
- Union Budget proposed removal of the dividend distribution tax (DDT) levied on companies.
- Government said that the new regime was expected to encourage more people, especially in the low tax bracket, to invest in the capital market.
More in the news
- Arguments by Government:
(1) With dividend now being proposed to be taxed in the hands of the investors at their applicable slab rate, non-residents would get some relief even as it addressed the issue of inequity in dividend taxation.
(2) Single rate of taxation is always iniquitous as it favours taxpayers who are in higher tax brackets and works against those who are in lower tax brackets.
(3) Thus, it was a case of reverse subsidy from the poor to rich taxpayers.
(4) Further, non-residents were taxed at a higher rate than the treaty rate with the possibility of no tax credit in the home country
- According to the government department:
(1) While the DDT was pegged at 15%, the effective rate touched 20.56% due to surcharge and cess.
(2) Additionally, individuals were required to pay another 10% plus surcharge if the dividend income exceeded ₹10 lakh in a fiscal.
- The government believes that the new regime, however, would encourage individuals in the low-income bracket to invest in the capital market as the tax incidence would drop significantly.
Source
The Hindu.