Budget bonanza: Govt likely to do away with dividend distribution tax

The finance ministry is likely to do away with the dividend distribution tax (DDT) in the upcoming Union Budget 2018. Sources in the know have said there have been considerable discussions on the topic among various stakeholders.

At present, if a company gives dividend to its shareholders, it has to pay DDT of 20.36 per cent (15 per cent plus surcharge and cess).

Two stakeholders, who met Finance Minister Arun Jaitley and Finance Secretary Hasmukh Adhia separately for pre-Budget consultations, told Business Standard that the issue of DDT came up in the meetings that took place between industry representatives and Adhia.

This move, experts say, would help the government in more ways than one — it would boost India Inc’s ease of doing business, encourage firms to give more dividends, and improve returns for retail investors in the lower income tax bracket.

“It is expected that Budget 2018 may propose a withdrawal of DDT and return to the classic system of dividend taxation, that is, dividend income to be taxed at the hands of the recipient shareholders,” said Sonu Iyer, partner and leader, India region people advisory services, EY.

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