Dividend distribution tax

Dividend distribution tax was a tax previously imposed by the Indian Government on Indian companies according to the dividend paid to a company's investors. The dividend distribution tax has been abolished since 2020 according to the Union Budget of India.^[1]

The Finance Act, 2020 changed the method of dividend taxation. Now all dividend received on or after 1 April 2020 is taxable in the hands of the investor/shareholder. The DDT liability on companies and mutual funds stand withdrawn. Similarly, the tax of 10% on dividend receipts of resident individuals, HUF and firms in excess of Rs 10 lakh (Section 115BBDA) also stands withdrawn.

The Finance Act, 2020 also imposes a TDS on dividend distribution by companies and mutual funds on or after 1 April 2020. The normal rate of TDS is 10% on dividend income paid in excess of Rs 5,000 from a company or mutual fund. However, as a COVID-19 relief measure, the government reduced the TDS rate to 7.5% for distribution from 14 May 2020 until 31 March 2021.

References

^ Motiani, Preeti (2 February 2020). "Dividend income becomes taxable in receiver's hands, DDT abolished". The Economic Times. Retrieved 2020-04-21.

[1] Motiani, Preeti (2 February 2020). "Dividend income becomes taxable in receiver's hands, DDT abolished". The Economic Times. Retrieved 2020-04-21.

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