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Dividend Distribution Tax – too high

JANUARY 30, 2017

By Rajiv Gupta

I want to draw attention of honorable Finance Minister on the Dividend distribution tax. Previously the dividend was taxable in the hands of recipients. Considering the fact that dividend is only distribution of profit of the companies, on which already income tax has been paid, dividend become exempt. But gradually the dividend distribution tax is increased and now dividend becomes taxable in the hand of recipients in case it is in excess of Rs. 10 lac. Means gradually again full tax has been levied on dividend income.

My humble submission is that dividend is only distribution of after tax profit of the company. Let take an example of the private limited company.

Particular

Amount (In lac)

Accumulated Tax

Profit of the company

100.0

 

Less Tax paid by the company

33.9

33.9

Balance amount

66.1

 

All 66.1 distributed as dividend than tax will be

11.4

11.4

Amount Received by shareholder

54.7

 

Dividend tax payable by the shareholder 10% of above

5.5

5.5

Total Tax

 

50.8

In this way total tax paid by the shareholder will be 50.8%, which is too much. At least in private limited companies DDT should be deleted.

(DISCLAIMER : The views expressed are strictly of the author and Taxindiaonline.com doesn't necessarily subscribe to the same. Taxindiaonline.com Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)

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