DDT News

It is to be noted that under the corporate system of taxation, a corporate entity is considered a separate legal entity and is taxed in respect of its income. The shareholders are also taxed on dividend income received by them and this tax is called Dividend Distribution Tax (DDT).

While presenting the Union Budget 2020-21 in Parliament on Saturday, the Union Finance Minister, Nirmala Sitharaman said, “The dividend shall be taxed only in the hands of the recipients at their applicable rates.”

Dividends received from all mutual funds are tax-free in the hands of the investors.

DDT has become burdensome for corporates due to various factors such as high rate, litigation on disallowance and hence the return on capital employed has significantly diminished.

The achieved collections are about Rs 9,000 crore or 14 percent short of the projected target of Rs 7,05,000 crore.

As the removal of MAT and DDT is unlikely, the Commerce Ministry has initiated the exercise to facilitate ease of doing business for special economic zones (SEZs) to revive the interest of investors.

The Commerce Ministry has sought a re-look at the taxation regime for the special economic zones (SEZs) in the forthcoming Budget to boost exports and investments.

Some announcement in this regard is likely to be made by Finance Minister Arun Jaitley in his Budget on February 28, sources said.

Export promotion body for special economic zones has asked the Finance Ministry to roll back or reduce the minimum alternate tax (MAT) and dividend distribution tax (DDT) on SEZs.