The government may abolish dividend distribution tax (DDT) during Budget 2020, a move that will lower the effective tax rate for companies, Business Standard reported.
The government may instead tax the shareholders who receive the dividends, the report said.
The current DDT rate is 20.55 percent, including surcharge and education cess, and the collection amounts to around Rs 60,000 crore each year.
“The Budget will address the issue of multiplicity of taxes for companies,” a source told the paper.
The move will help both domestic and overseas investors.
Moneycontrol could not independently verify the story.
A panel led by Akhilesh Ranjan has recommended scrapping of the DDT. The panel also suggested keeping the long-term capital gains (LTCG) tax and securities transaction tax (STT).
Ranjan is a former chairman of the Central Board of Direct Taxes (CBDT).
In November 2019, Finance Minister Nirmala Sitharaman termed the DDT and minimum alternate tax as regressive.
If DDT is abolished, it will be done through changes in Section 115 (O) of the Income-Tax (I-T) Act.
Sitharaman will present the Budget on February 1.
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