About:
- Dividends paid by a domestic company are subject to dividend distribution tax (DDT) at 15 per cent of the aggregate dividend declared, distributed or paid.
- The effective rate is 20.35 per cent, including a 12 per cent surcharge and a 3 per cent education cess.
View of the task force on direct tax code (DTC):
- It has recommended abolishing DDT with a view to promote investment.
- According to it, DDT is a surrogate tax and it hinders foreign direct investment inflows. Also, there are hardly any revenue loss by removing DDT, since it will be offset by the taxes paid by shareholders.
- The panel favours replacing DDT with a classical system of taxation under which dividend receipts be declared as normal income.
