FinMin rules out rethink on tax on dividends beyond ₹10 lakh

K. R. Srivats  | | Updated on: Jan 19, 2018




India Inc pitches for continuation of tax incentives for R&D spends

The Finance Ministry has virtually ruled out any rethink on the Budget proposal to tax dividends above ₹10 lakh a year at the hands of the recipient.

This is even as several suggestions came at a post-Budget meeting organised by the Confederation of Indian Industry (CII) to tweak this proposal or even drop it.

“We are not looking to bring any change to this proposal,” Shaktikanta Das, Economic Affairs Secretary, told BusinessLine on the sidelines of this meeting, when asked whether the government would rethink this proposal in the wake of India Inc’s suggestions.

Industry view Sunil Kant Munjal, former CII President, had at the meeting suggested that government should look to collect the tax on dividends in excess of ₹10 lakh as ‘tax deduction at source’ by the company declaring the dividend, rather than tax it at hands of recipient.

Earlier, in his address, Das said this proposal will ensure enhanced collection of taxes while maintaining the principle of equity.

He said the dividend distribution tax (DDT) uniformly applies to all investors, irrespective of income slabs. This is perceived to distort the fairness and progressive nature of taxes. People with relatively higher income can bear a higher tax cost.

A CII member even maintained that this proposal is tantamount to triple taxation and needs to be dropped.

Rahul Bajaj, Chairman of Bajaj Auto and past CII President, later told BusinessLine that he was in support of the proposal on dividends. “I am one of the largest recipients of dividends in the country. I am okay with it,” he said.

R&D tax breaks At the meeting, industry representatives urged Finance Ministry top brass — Revenue Secretary Hasmukh Adhia and Economic Affairs Secretary Shaktikanta Das — to also reconsider the proposal to phase out tax incentives (weighted deduction) on research and development (R&D).

Ruling out a rethink, Adhia said the benefit of phasing out of exemptions (including gradual withdrawal of R&D tax breaks) would kick in for the government only from 2017-18 (benefit being only ₹3,000 crore). The final phase-out of all exemptions is expected only in 2033.

CII members said the government should promote innovation in the country and felt that it was not right to scale back the existing tax breaks (weighted deduction) for R&D expenses.

Published on March 02, 2016
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