Much talk on removal of Dividend Distribution Tax (DDT) over the years to reduce the tax burden. With the changes in the budget 2020, the applicability of taxes were a bit deferred towards to the shareholder from the company. Covers Dividend Distribution Tax, it's applicability, and changes proposed in the Budget 2020.
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Dividend usually refers to the distribution of profits by a company to its shareholders. Section 2(22) of Income tax act covers the Dividend. Dividend shall also include the following.
Finance Minister has abolished the Dividend Distribution Tax (DDT) in Budget 2020 and made a move to classic system of taxation wherein dividends are taxed in the hands of investors.
The Taxability of dividends in the hands of company as well as shareholders from AY 2021-22 are as follows
Hon’ble FM Sitharaman made a great move in abolishing the DDT to encourage companies, equity markets and inviting foreign companies and funds to invest in Indian Companies. But such DDT is expanded in the hands of the receiver (shareholder) as it is now fully taxable, as this will affect many investors who receive Dividend up to 10 Lakhs in a year.
On the other hand, the abolition of DDT made all investors equal on the payment of taxes related to Dividends whether they are rich or small-time investors.
If you have dividend income this year, make sure it is part of the advanced tax calculation to avoid any interest on such at the time of filing your taxes. Check with Team EZTax.in in case you need a consultation and/or advanced tax calculation & filing service.
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