Latest News
-
FREE, FREE, FREE! 3:1 Bonus: Pharma Stock Hits Back-To-Back Upper Circuits; 500 Shares To Earn Rs 1,69,500 -
1:10 Stock Split: Below Rs 10, Fertilizer Sector Turned Ex-Split; 8,282% Returns In 5 Years -
Rs 17/Share Dividend: Record Date On April 26; Buy The ICICI Group Stock To Be Eligible? -
Honasa Consumer to Strengthen Operations by Merging Fusion Cosmeceutics and Just4Kids -
Wipro Reports 7.8% Decline in Q4 Net Profit; CEO Highlights Economic Challenges -
IREDA Hits Record Annual PAT of Rs 1,252 Cr in FY24; Q4 Profits Up by 33% -
Massive Employee Exodus Hits India's Top IT Companies in FY23-24 -
Air India Enhances Operational Efficiency with New Crew Management System -
BlackRock Acquires Shares in Electrosteel Castings and PTC India for Rs 207 Crore -
IndiGo Enhances Domestic Routes with Direct Chennai-Durgapur Flights
What is dividend distribution tax?
What is Dividend Distribution Tax?
Section 10(34) of the Income Tax Act, 1961 declares that in addition to the income tax paid by a domestic company against the total income for any assessment year, any amount declared, distributed or paid by such company in form of dividends, is subject to additional tax known as Dividend Distribution Tax. DDT is also applicable to debt mutual funds and is the tax that debt funds pay on the dividend distributed to retail investors.
Who needs to pay?
As the companies or mutual funds pay the dividend distribution tax, dividend income is tax-free in the hands of the investor. Before actual payment, companies and debt funds deduct DDT from the declared dividend and rest is distributed to the investor. Hence, common investor doesn't have any tax liability on the dividend income, but the dividend income is actually not tax free.
Why Investor should be concerned?
It's an old and controversial tax, but the renewed concern is because of recent ruling by the finance ministry to increase dividend distribution tax. Now, the tax rate on debt fund investments for retail investors is 25%, which was 12.5% earlier. This tax increase is going to impact all debt funds, gold exchange traded funds, and global funds since the post tax returns from these will be lesser now. Liquid funds are already taxed at 25% hence there is no change for them.
About the Author:
The author Bimlesh Singh is a financial advisor. He holds a Bachelor's degree from IIT and is a CFA Level 2 candidate. He can be reached at [email protected]
Courtesy:www.investmentyogi.com
