Navigating the Changes: Dividend Distribution Tax (DDT) Abolishment

Understanding DDT: DDT was akin to TDS, levied on companies distributing dividends to shareholders, ensuring the government's share of tax revenue from corporate earnings. Impact of Abolishment: Budget 2020 abolished DDT, shifting the tax burden from companies to shareholders, making dividend income taxable in their hands.

Previous Regime: Under Section 115O, domestic companies paid DDT at a rate of 15% on gross dividends, effective rate being 17.65%. Budget 2021 Amendments: Dividends paid to REITs and InvITs exempt from TDS. Advance Tax liability on dividend income arises upon declaration or payment of dividends.

Calculation Example: Gross Dividend = Net Dividend + DDT Effective DDT rate: 17.65%, excluding cess and surcharge.

Abolishment Implications: Dividend income, previously exempted up to INR 10 lakhs, is now taxable for investors, subject to slab rates. Introduction of new TDS sections: 194K for Equity Mutual Funds and amendments to existing Section 194 for Equity Shares.