Finance Minister Nirmala Sitharaman said at the Union Budget 2020-21 presentation that the Dividend Distribution Tax (DDT) will not be required to be paid by companies. Tax rules will be tweaked to make it dividend taxable in the hands of the receiver as part of their income earned at the rate applicable based on their income tax slab.
Currently, Indian companies are required to pay over 15 percent DDT on declared dividends and investors pay another 10 percent tax on receiving more than one million rupees ($14,070) dividend in a financial year.
Experts say that these rules do not allow foreign investors to claim tax credit in their countries and small investors are forced to pay a higher tax.
Suggestions were made to the Finance Ministry to make DDT applicable at the receiver's end as part of the income earned instead of deducting as tax-at-source by the issuer of the dividend.