Surcharge Sprays DDT, Companies Left Fuming

India Inc was in for a rude shock with an increase in surcharge from 5% to 10% which impacted not just corporate tax rate but also dividend distribution tax (DDT).

Against an aggregate dividend of Rs 52,896 crore declared during 2012 (being the latest available figure ), the BSE 30 companies provided for Rs 8,547 crore approximately as DDT.

From the financial year ended March 31, 2012, DDT has remained constant at 16.22%. Thus,on the assumption that the dividend payout remains the same, DDT liability for BSE 30 companies for the year ended March 31,2013 continued to be the same. If we assume that the dividend for the year ended March 31, 2014 will remain the same, the BSE 30 companies will need to provide for an additional DDT of around Rs 410 crore or a DDT of Rs 8,990 crore in total.

India is probably the only country which imposes a dividend distribution tax on companies declaring dividends. The dividends are tax free in the hands of shareholders, including foreign shareholders.

Times of India, New Delhi, 01-03-2013