Union Budget 2020: Govt Abolishes Dividend Distribution Tax, Aims For Higher Investments

Union Budget

The Finance Minister Nirmala Sitharaman announced that the government has abolished the Dividend distribution tax while presenting the Union Budget 2020

Written By Varsha Chavan | Mumbai | Updated On:

The Finance Minister Nirmala Sitharaman on Saturday announced that the government has abolished the Dividend Distribution Tax while presenting the Union Budget 2020. She further mentioned that the government has over Rs 25,000 crore as revenue foregone due to DDT abolition. The government's revenue foregone is in the form of incentives and tax exemptions to corporates.

During the presentation of the Budget 2020, Sitharaman said, "Dividend Distribution Tax to be removed, companies will not be required to pay DDT; dividend to be taxed only at the hands of recipients, at applicable rates. A total of Rs 25,000 crore is revenue foregone due to DDT abolition. This will make India an attractive investment destination."

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New Tax Regime

FM while announcing a new tax regime, said that: "We propose to bring a personal income tax regime, where income tax rates will be reduced, so now, a person earning between Rs 5-7.5 lakhs will be required to pay tax at 10% against current 20%."

New Tax slab (without exemptions):
No tax: 0-2.5
5% between 2.5-5 lakh
10% tax between 5-7.5 lakh
15% between 7.5-10 lakh
20% between 10 lakh-12.5 lakh
25% between 12.5-15 lakh
30% between above 15 lakh

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About DDT

A dividend is a return that is given by the company out of the total profits that it earns in a year. The DDT is levied on dividends that are distributed by the companies who are making a profit. It is considered as an additional tax that is levied on the company which is already paying a tax. Currently, along with income tax, Indian companies are paying 20 to 21 per cent DDT. However, an additional tax is imposed on the shareholder, who receives over Rs. 10 lakh in dividend income in a financial year.

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