The task force on direct tax code has recommended to the govt. to abolishing the dividend distribution tax (DDT).
“The idea behind the removal of DDT is to remove the cascading impact of taxation and the panel favours no preferential treatment for any class of investor”
The effective rate of DDT is 20.3576%, including a 12% surcharge and a 3% education cess.
The proposed move to withdraw the DDT would help encourage investment by address multiple taxations of income and bringing down the effective rate on companies.
There is strong case to do away with the DDT to improve investor sentiment. It is resulting in a multiplicity of taxation for companies. Besides, the foreign shareholder cannot avail of the foreign tax credit as the DDT is not borne directly by them.