Dividend Distribution Tax (DDT)

Dividend Distribution Tax - Background Context

The "Dividend distributes Tax (DDT)" is the transition of collection of Dividend Tax from companies to individuals, says Financial Minister (Mrs. Nirmala Sitaram).

It is the tax imposed on dividends that organizations and enterprises pay to their investors and stakeholders out of its profit.

Dividend Distribution Tax (DDT)

How DDT is applied?

The Dividend Distribution Tax (DDT), is taxable at the origin and as company or organization distributes the dividend, the DDT is deducted at times of distribution.

  • A dividend is a profit that the company distributes among its shareholders.
  • The law creates a groundwork for the "Dividend Distribution Tax" to be imposed on companies and organization and not on investors and stakeholders.
  • Moreover, the additional tax is levied on the shareholders, who are entitled to receive more than 10 lakh dividend income in a given financial year.

Is DDT applicable to private companies?

According to the Income Tax Act, Section 115-0, any firm (local or domestic firm) engaged in the distribution of the dividend has to pay 15 tax on the gross amount of the dividend.

Is the Dividend Distribution Tax fair? 

DDT is considered to be cumbersome and unnecessary, and very unwelcomed within the broker's community. They have been suggesting to scrap DDT. It's obvious, the series of taxes and their tax bands makes the investment market unattractive as it leads to notable taxation of corporate earning they say. 

Apart from Dividend Distribution Tax (DDT), there are a series of taxes, such as Securities Transaction (STT) and also the Long-Term Capital Gain (LTCG) tax are the other major taxes imposed on the market instruments.

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