Budget 2020 presented by the Finance Minister Nirmala Sitharaman on February 1, 2020, has proposed to abolish the dividend distribution tax (DDT).
This is expected to bring in relief to the investors in the country. Dividend income will now be taxed only in the hands of investors as per the tax rate applicable to their income, Finance Minister Nirmala Sitharaman announced in her Union Budget 2020 speech. “Further, in order to remove the cascading effect I propose to allow deduction for the dividend received by a holding company from its subsidiary.”
So far, companies were required to pay DDT at 15 percent, though including surcharge and cess put the effective rate at 20.56 percent. DDT was introduced in 1997 at a 7.5 percent flat rate in an effort towards efficient tax collection.
According to the tax and investment experts, it will bring transparency in dividend payment as from now on, the company need not deduct DDT Tax. An investor will get the entire amount that accrues through investment and the tax liability has to be adjusted by the investor only.