DDT removal is a big step. Is it really?

There was a long standing demand from market about doing away with the DDT, primary reason being is amounts to double taxation, i.e. first a company pays corporate involved tax on its profits then pays DDT on dividend to shareholders. In the recently announced Union budget government has done away with the DDT and has made it taxable in the hands of receiver according to individual's applicable tax rate.

The decision is a big step, but falls short of fulfilling the real objective. First, the new regime still tentamounts to double taxation, though now two different entities bear burden. Second, the effective date for HNIs and even most of the upper middle class is set to increase now. Earlier the effective DDT rate was around 17% and was not taxable in the hands of receiver other than those who had total dividend income in excess of Rs. 10 Lakh where they had to pay 10% tax on dividends. Now the person in top most bracket had to effectively pay tax of more than 42%.

An article appearing in the Business Standard to this effect is enclosed.