DDT is a surrogate tax and it obstructs the flow of FDI. Doing away with this tax can give a major push to investment.
In the Union Budget presented today, FM Nirmala Sitharaman proposed to remove the deeply unpopular dividend distribution tax (DDT).
According to industry and markets, dividend distribution tax is a surrogate tax and it obstructs the flow of foreign direct investment. Therefore, doing away with this tax can give a major push to investment.
The abolition of this tax can also boost market sentiment and make Indian equities more attractive.
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The clamour had been growing for the abolition of DDT ever since the corporate tax cut in September. The task force on the direct tax code had also recommended scrapping this tax in order to boost investments.
Domestic companies at present are subject to DDT at 15 per cent of the aggregate dividend declared, distributed or paid. As it also includes a 12 per cent surcharge and a 3 per cent education cess, the effective DDT rate comes to 20.35 per cent.
Source: Economic Times