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Rationalise dividend distribution tax rate to 10%: CII

IANS  |  New Delhi 

The distribution rate should be cut to 10 per cent in order to encourage participation of different stakeholders in the country's financial markets, industry body said on Sunday.

In its recommendations to the government on the forthcoming Union Budget, the (CII) has also said that, alternatively, to negate the multiple level taxation issues regarding distributed, the company paying should pay on its profits, including distributed profits, at corporate rates.

"Dividend should be taxed in the hands of the non-corporate (leveraged) as normal income, and expenses should be allowed against such dividend in full," a release said here.

The chamber has also recommended "that Section 80M which granted deduction of inter corporate dividend received by a domestic company to the extent of amount distributed by the recipient domestic company on or before the due date of filing return of income, should be reintroduced to preempt double taxation of inter corporate dividend.

"The second proposal is regarding "

"Conducive taxation framework is a vital cog in the wheels of the financial markets and has the potential to make or break the market," said in the statement.

On the with-holding (WHT) provisions for foreign portfolio investors (FPI), CII has suggested the reduced tax should be made perpetual, and not expire after June 2020, "to ensure tax certainty and higher participation from international investors".

Currently, WHT deduction at source on interest payments to FPIs stands at 5 per cent on investments in rupee denominated domestic corporate bonds. It was reduced from 20 per cent to 5 per cent and has been made available till June 2020.

"FPIs interest in participation in Indian is increasing due to the sound economic growth of the country and the bare minimum incentive they want is tax certainty in the long term," the statement said.

CII also recommended granting WHT exemption to FPIs to incentivise their participation in municipal bonds, saying this could help increase inflow of long term from pension funds.



(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Sun, January 14 2018. 18:18 IST