In income tax rule change, govt considers tweaking dividend distribution tax

  • Investors, who are also taxed on their dividend earnings, have protested multiple levies
  • Over recent months, authorities have slashed corporate taxes

The government is considering changes to its dividend distribution tax. It will raise returns for investors, according to people familiar with the matter, as authorities try to revive foreign fund inflows.

The budget statement due February will probably include a proposal to tax dividends once they are paid to shareholders.  That will allow individuals to claim refunds in their home jurisdictions.

This move from PM Narendra Modi’s government to prop up the growth from the lowest in six years. Authorities have slashed corporate taxes, rolled back a levy on global funds, injected $10 billion into struggling state banks, and eased foreign investment rules.

Indian companies need to pay the 15% tax of dividends declared, which rises past 20% once surcharges are added.

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