Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT RATES :: due date for vat payment :: ACCOUNTING STANDARD :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARDS :: form 3cd :: TDS :: VAT Audit :: empanelment :: TAX RATES - GOODS TAXABLE @ 4% :: cpt :: articles on VAT and GST in India :: Central Excise rule to resale the machines to a new company :: list of goods taxed at 4%
 
 
General »
 While filing tax in India, NRIs do not have to report overseas assets
  Clarification regarding applicability of Section 16 (1)(a) of the Companies Act. 2013 with reference to cases under corresponding provisions of Companies Act. 1956 -reg.
 SH. VISHWA NATH GUPTA Vs. PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL, KANPUR AND ANR.
 No tax scrutiny of big transaction if it matches income
 Clarification regarding applicability of Section 16 (1)(a) of the Companies Act. 2013 with reference to cases under corresponding provisions of Companies Act. 1956 -reg.
  Home loan tax reliefs often missed by taxpayers
 Income tax department launches online facility for linking Aadhaar and PAN
 Home loan tax reliefs often missed by taxpayers
 Tax headache in India is a bonanza for global accounting firms
 Activities To Be Treated As Supply Even If Made Without Consideration Under CGST ACT
  Haryana Goods and Services Tax Bill passed

Tax investors, not companies
January, 19th 2010

SEBI and the Reserve Bank want to stop companies and banks from putting their money in mutual funds (MFs). They prefer to invest through MFs because of a tax arbitrage: dividends distributed by debt MFs attract a lower rate of tax as compared to income generated by direct participation in the market.

This tax arbitrage is irrational and must go. The government should scrap dividend distribution tax (DDT) levied on companies and instead tax dividends in the hands of shareholders. The original rationale for a DDT to replace tax on dividends was administrative ease and evasion of tax by a variety of investors.

A practical way out is to mandate electronic crediting of all dividend payments and presumptive deduction of 30% tax at source. This was not possible in 1997 when DDT was first introduced and when bank computerisation was still patchy. Investors who fall in the lower tax brackets of 10% and 20% can claim refunds. Income-tax authorities must, of course, streamline refunds, in tandem.

In effect, dividend income should be taxed according to the individual shareholders tax slab. A change in the tax treatment on dividends will have multiple benefits. It would boost the governments revenues, as promoters, who have been paying themselves hefty, tax-free dividends, pay 30% tax on their income. It would end the tax arbitrage on investments in MFs and, thereby, remove the artificial incentive companies have for carrying out their treasury deployments through MFs.

Similarly, it would remove a large part of the incentive that banks have for lending to one another and to companies via MFs. There would be greater transparency on bank lending. Such a move would, in addition, restore salience to the role of MFs as vehicles for retail investors to invest in securities. And all MFs can have tax pass-through status.

The short point is the superiority and administrative ease of taxing dividends in the hands of shareholders as compared to taxing companies for the dividends they distribute. In the long run, as and when all tax exemptions are removed, and tax revenues rise to required levels, dividends could be exempt from tax altogether.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Bath SEO Company Birmingham SEO Company Bradford SEO Company Brighton and Hove SEO Company Bristol SEO Company Cambridge SEO Company Canterbury SEO Company Carlisle SEO Company Chester SEO Company Chichester SEO Company Coventry SEO Compan

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions