In a Union Budget 2020 presented today, the Central Government has removed the Dividend Distribution Tax.
Currently, companies are required to pay Dividend Distribution Tax (DDT) on the dividend paid to its shareholders at the rate of 15% plus applicable surcharge and cess, in addition to the tax payable by the company on its profits.
In order to increase the attractiveness of the Indian Equity Market and to provide relief to a large class of investors, the Finance Minister has proposed to remove 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.
In order to remove the cascading effect, the Finance Minister has proposed to allow a deduction for the dividend received by holding company from its subsidiary.
The removal of DDT will lead to an estimated annual revenue foregone of Rs. 25,000 crore. This will further make India an attractive destination for investment.
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