In its annual budget, the government announced that those promoters holding shares through private trusts will have to shell out a DDT of 10% on dividend income that exceeds Rs. 10 lakh. With it, the regime in respect of the withholding tax shall also see an overhaul.
"The reform is in the final stage of discussion and necessary proposals could come out in the next few weeks," said an official.
The dividend distribution tax is payable on the dividends paid by companies to shareholders on a time to time basis. Such tax was earlier levied only in respect of individuals, partnership firms and HUFs. The taxation is applicable for every dividend paid by a company from the financial year 2013-14.
The changes are being cited to benefit retail investors such that their interest to remain invested in stock markets remain buoyant. Also, the Indian stock market has seen more capital distribution through buybacks or dividend than it has been raised.