(The Gist of PIB) Dividend Distribution Tax [FEBRUARY-2020]
(The Gist of PIB) Dividend Distribution
Dividend Distribution Tax
In order to increase the attractiveness of the Indian Equity Market, to
provide relief to a large class of investors and to make India an attractive
destination for investment, the Union Budget proposed to remove the Dividend
Distribution Tax .
Currently, companies are required to pay DDT on the dividend paid to its
shareholders at the rate of 15% plus applicable surcharge and cess in
addition to the tax payable by the company on its profits.
It has been argued, she added, that the system of levying DDT results in
increase in tax burden for investors and specially those who are liable to
pay tax less than the rate of DDT, if the dividend income is included in
Further, non-availability of credit of DDT to most of the foreign
investors in their home country results in reduction of rate of return on
equity capital for them.
Concessional tax rate for Electricity generation companies:
In order to attract investment in the power sector, the Union Budget
proposes to extend the concessional corporate tax rate of 15% to new
domestic companies engaged in the generation of electricity.
To give a boost to the manufacturing sector, a concessional corporate
tax rate of 15% was introduced in September 2019 to the newly incorporated
domestic manufacturing sector which start manufacturing by 31st March, 2023.
Concessional tax rate for Cooperatives:
As a major concession and in order to bring parity between the
cooperative societies and corporates, the Union Budget proposed to provide
an option to cooperative societies to be taxed at 22% + 10% surcharge and 4%
cess with no exemption/deductions. These cooperatives are currently taxed at
a rate of 30% with surcharge and cess.
The Finance Minister also proposed to exempt these cooperative societies
from Alternate Minimum Tax (AMT) just like Companies which under the new tax
regime are exempted from the Minimum Alternate Tax (MAT).
For realisation of the goal of ‘Housing for All’ and affordable housing,
an additional deduction of up to one lakh fifty thousand rupees for interest
paid on loans taken for purchase of an affordable house was announced in
last year’s budget. The deduction was allowed on housing loans sanctioned on
or before 31st March, 2020.
In order to ensure that more persons avail this benefit and to further
incentivise the affordable housing, the Finance Minister proposed to extend
the date of loan sanction, for availing this additional deduction by one
Referring to the tax holiday provided on profits earned by developers of
Affordable Housing projects approved by 31st March, 2020, Smt Sitharaman
proposed to extend the date of approval of affordable housing projects for
availing this tax holiday by one more year.