Budget 2024: What is Dividend Distribution Tax? Know How it will abolition impact the Indian economy?
Dividend Distribution Tax (DDT) underwent significant changes in India with the abolition of DDT in the 2020-21 Budget. Traditionally, dividends are payments made by companies to shareholders from their profits. DDT, introduced in the Finance Act of 1997, was a tax levied on these dividends distributed by domestic companies, irrespective of their income tax obligations on those profits.
The decision to abolish DDT marked a substantial shift in tax policy. Previously, DDT imposed a burden directly on companies, reducing the amount of dividends received by shareholders. Post-abolition, Finance Minister Nirmala Sitharaman announced that dividends would now be taxed in the hands of the shareholders themselves. This change aimed to streamline the taxation process, making it more transparent and aligning it with international norms where dividends are typically taxed at the individual level.
The economic implications of abolishing DDT were widely anticipated. By removing this tax, Indian equities were expected to become more attractive to investors. The move was seen as potentially boosting market sentiment and encouraging companies to reinvest profits back into the economy. This reinvestment could stimulate economic growth and create employment opportunities. Moreover, the abolition of DDT was expected to make India a more appealing destination for foreign investors, potentially leading to increased Foreign Direct Investment (FDI).
Overall, the decision to abolish DDT was viewed positively within the business
