Maier+Vidorno

Abolition of Dividend Distribution tax in the hands of Corporates

Client Speak
LI Ping HR Director / BHS Corrugated Machinery(Shanghai) Co.Ltd

Strong support in recruitment
M+V is very professional in India HR market. They were able to provide us with strong support in our recruitment. We are satisfied with their service.

Falk Tzchichholz Sales Manager Export / Kjellberg Vertrieb GmbH

Incubation solution
With the incubation solution from Maier + Vidorno , we successfully placed our products in the Indian market and established valuable product market presence, which we can now build on further with our subsidiary

Andreas Dauerbock Quality Assurance / Voestalpine Grobblech GmbH

BIS registration project
The BIS registration project went smooth and efficient. We are very satisfied with the way the documentation, communication and inspection on-site was handled from the Maier+ Vidorno Team. We are happy to recommend working with M+V in India – with the expert’s advice you will need.

Rajesh Nath Managing Director / VDMA India Services Pvt Ltd German Engineering Association

Competent Partner
India has great investment potential for foreign companies if you manage the highly complex business environment professionally. Our experience shows – Maier+Vidorno is a competent partner to efficiently set up and run business.

Bjoern Becker Export Sales / Jumo GmbH & Co KG

Market Presence and Profitability
The cooperation of JUMO and Maier+Vidorno is a success story in India since 2008. Our sales, market presence and profitability in India shows constant growth. M+V knows about the challenges foreign companies face while doing business in India – and provides hands-on solutions.

Rene Pluss CFO, Member of the Board / Regent Beleuchtungskorper AG

Business Diagnostic and Implement Improvement
Maier+Vidorno understands business challenges in the Indian business environment and provides solutions with the help of its experts. M+V has experience in running business diagnostics and implement improvement and expansion strategies in various industries in India.

    Abolition of Dividend Distribution tax in the hands of Corporates-M+V Altios

    Sanjeev Kumar | Chartered Accountant and Consultant | Maier+Vidorno

    LinkedIn | Twitter | Google+

    April 2020

    In addition to income tax chargeable in respect of the total income of a domestic company, any declaration, distribution or payment by way of dividends shall be subject to additional Income-tax at the rate around 20.56% including surcharge and cess. The taxes so paid by the company (called Dividend Distribution Tax – DDT) is treated as final payment of tax in respect of the amount declared, distributed or paid by way of dividend. Such Dividend was earlier exempt in the hands of Shareholders. The similar provision was applicable for mutual funds.

    The Incidence of tax is thus on the payer company and not on the recipient, where it should normally be. DDT also has a cascading effect of taxes. It will now be subject to double taxation in the form of corporate tax and DD.

    Budget 2020: Dividend Distribution Tax

    In view of the above,Β Finance MinisterΒ while presenting Finance Bill, 2020, proposed to abolish the Dividend Distribution Tax (DDT) levied on dividends distributed by companies. With the proposed amendment, India will again move to the classical system of taxing dividend income. It will again be taxed in the hands of shareholders / unit-holders.

    This proposal would boost market sentiment and allow companies to invest more in the economy. The move will also make the Indian equities more attractive to foreign investors. Besides, it will also increase Foreign Direct Investment (FDI).

    Also in the earlier tax rate reform regime, no credit was available to most of the foreign investors in their home country. This was resulting in the lower return of income on equity. Earlier, tax payment on Dividend was sunk cost for the Inventors. Now with these amendments, the paying company shall deduct withholding taxes. It shall deduct 10% tax in case of dividend payment to a non-resident and 5% in the case of residents. Individuals can claim a tax credit for the amount of withholding taxes in their home country.

    The proposal is valid for the dividend declaration after 1stΒ April 2020

    Impact of Proposal

    The Following would be the impact of this proposal:

    • Dividends distributed by a domestic company weren’t included in the total taxable income of an assessee prior to these amendments. Now, dividends will form part of the taxable income of an assessee under the head β€œincome from other sources”.
    • Income distributed by a mutual fund registered with Securities and Exchange Board of India or a specified company after April 1 will be taxable in the hands of the assessee.
    • An Indian company declaring dividends must deduct income tax. Tax deduction should be at the rate of 5/10 per cent if the amount distributed exceeds Rs 5,000.

    On the compliance part, residents and non-residents will have to comply with new withholding tax compliances on payment of Dividend. Non-residents need to file their tax returns in respect of Dividend Income earned in India along with other Income.

    The above-mentioned tax rate reforms aim to boost FDI in India and promote economic growth in the country.

    For the last more than 20 years, Maier+Vidorno has been addressing these business needs of overseas companies. Our experience and knowledge of Indian accounting and corporate compliance allow us to help international businesses explore the Indian market. We also offer other support services in areas of Market Research, Distribution Management,Β Import-Export Management, Supply Chain & Logistics Management,Β Performance Management,Β Business Due Diligence, Recruitment, and HR Consulting. to know more.Β Contact usΒ to know more.