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Thursday, Apr 18, 2002

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PMO to decide on dividend tax issue

Hema Ramakrishnan

NEW DELHI, April 17

THE Finance Ministry has left it to the Prime Minister's Office (PMO) to take a final decision on India Inc's demand to roll back the crucial budget proposal on taxing dividends at the hands of the shareholders.

On its part, the Revenue Department has made out a case against any rollback of the dividend tax proposal and instead recommended modifications including a comprehensive relief package for shareholders. The restoration of deductions under Section 80 L and a threshold exemption on tax deducted at source (TDS) form a part of the package.

The proposal to shift the incidence of tax on dividends from the company to the shareholders was on the agenda of today's meeting between the Prime Minister, Mr Atal Bihari Vajpayee, and the Finance Minister, Mr Yashwant Sinha, to discuss the official amendments to the Finance Bill 2002.

Mr Sinha is leaving for Washington tonight to attend the spring meeting of the World Bank and the International Monetary Fund (IMF) and is scheduled to return to Delhi on April 22. The official amendments to the Finance Bill will be sent to the Law Ministry for clearance after Mr Sinha returns from Washington.

According to official sources, the PMO is also expected to take the final decision on whether or not to roll back the proposal to tax 10 per cent of the export profits made by export-oriented units (EOU) for a year.

The ball has been thrown in the PMO's court as the post-Budget representation to restore 100 per cent income-tax deduction on export profits available under Section 10 A and 10 B of the Income-Tax Act 1961 to units in special economic zones, 100 per cent EOUs and software technology parks (STP) has come from the Chief Minister of Andhra Pradesh, Mr Chandrababu Naidu.

Here again, the Revenue Department's view is that there is no case for a rollback as the levy is only for one year.

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