Dividend tax only on dividend income above Rs 10 lakh

The new 10 per cent Dividend Tax will be payable only on dividend income over and above Rs 10 lakh threshold in a year, according to an amendment to the Finance Bill 2016 approved by Lok Sabha.
Finance Minister Arun Jaitley had brought 21 amendments when he replied to the debate on Finance Bill 2016 in the Lok Sabha yesterday. The Bill and the amendments were approved, making the culmination of the three-stage budgetary process in Lok Sabha. The Bill will now go to Rajya Sabha.
One of them seeks to "clarify that tax shall be chargeable on dividend income only to the extent it is in excess of Rs 10 lakh in aggregate as received from a domestic company or companies," the narration of the amendments released by the Finance Ministry here today said.

This essentially means, tax payers whose dividend income crosses Rs 10 lakh would now have to pay an additional dividend tax on the excess income besides the dividend distribution tax being paid by the company/companies declaring such dividends.
This amendment will be effective for the assessment year 2017-18 and subsequent assessment years.
One of the amendments was to put into effect the post Budget announcement of rollback of proposal to tax employee provident fund (EPF) withdrawals.

But the proposal of 40 per cent exemption given to National Pension Scheme (NPS) subscribers at the time of withdrawal will remain, it said.

Another amendment cut the duration for holding of shares in an unlisted company for being classified as long term capital asset. The duration of holding has been reduced from 36 months to 24 months.
Yet another amendment extended the benefit of weighted deduction of 150 per cent of expenditure incurred on notified agricultural extension projects till March 31, 2020 (FY2019-20 or Assessment Year 2020-21) instead of Budget proposal to restrict the deduction to 100 per cent from 2017-18 fiscal (Assessment Year 2018-19).
Another amendment included Limited Liability Partnership (LLP) in the definition of 'start-up' firms.
Jaitley had in his Budget provided exemption from payment of Securities Transaction Tax (STT) on transactions undertaken in foreign currency on a recognised stock exchange in International Financial Services Centre (IFSC) and extended the benefit of exemption for long term capital gains.

However, by implication, benefit of 15 per cent of tax on short term capital gain under section 111A may have been denied in case of such transactions owing to non-fulfilment of condition of payment of STT.
Chandra said individuals with unaccounted deposits have
an option of availing of the new tax amnesty scheme, PMGKY and deposit 50 per cent tax.
"Some people have misused (the facility to deposit old notes). One person has put Rs 2 lakh in each employees account, then some dose that is required which will be survey or search.
"We have found that one trustee who was running an educational institution, he put Rs 2 lakh in each employees account and one of them complained, and we searched him and he surrendered around Rs 10 crore," he said.

He said action is required against all person who mis- utilised the window given to people to deposit their holding of old Rs 500 and Rs 1000.
"Our approach is very clear, very low rate please come (to pay tax). We will persuade through SMS, pay your taxes. If not, something more is required," he said. "Time has come we should be very clear about our tax liability... I will be happy if we can reach to that level where the person should be tax compliant and Section 132 (relating to search), 133A (relating to survey) can be removed from I-T Act."

On the user interface given on the income tax e-filing website to verify deposits and provide clarification, he said already 2 lakh people have logged in on it. The CBDT has sent SMS/emails to 18 lakh people who have made suspicious deposits over Rs 5 lakh during the 50 day demonetisation period.
"They are giving their responses. After seeing their responses we will match with our data bank and then send notice. The notice won't be statutory notice as we will give them another chance by asking them to clarify. If they still do not reply then we will think on how to take the investigation forward. We want to be non-intrusive," Chandra added.