Committee recommends withdrawal of DDT while maintaining LTCG and STT

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Mumbai, Ta. August 28, 2019, Wednesday

The committee, which has been set up to study the amendments to the Income Tax Act, estimated at 4 years old, has recommended maintaining long-term capital gains tax (LTCG) and securities transaction taxes (STTs) and eliminating dividend distribution taxes (DDTs). The committee has suggested a tax levy from the person receiving the dividend, sources said.

If the DDT withdrawal proposal is approved, it will solve many taxation problems and bring down the effective rate of tax on companies. The highest rate of effective taxation on our companies in the world.

An eight-member committee on the Direct Tax Code (DTC) submitted its report to the finance minister last week. The committee has recommended a series of amendments to the personal income tax to increase taxation obligations and make higher tax levels of 20 percent and 9 percent practical.

The LTCG, which was introduced in last year's budget, is being demanded by the country's stock market players and investors to withdraw, but the committee said that no issue should be given to investors regarding any tax.

5% LTCG is levied on profit against transfer of listed equity shares of over one lakh rupees. Since STT is a simple and fixed income tax, it should not be withdrawn. Delivery-based equities are 0.5 percent on deals and STTs on purchases in intra-day transactions are zero, while sales turnover is 5.7 percent.

There are strong reasons for the withdrawal of DDT to improve the mood of the investors, the committee also noted. It is not feasible to collect DDT as the company pays dividends from its profit and has already paid tax on the profit. The DDT withdrawal industry has long been in demand.


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