While the revenue secretary has justified making dividends taxable in the hands of recipients, the move will benefit foreign portfolio investments only. Most senior citizens/retirees with moderate taxable income of Rs 10-15 lakh would end up paying tax on dividends at the highest slab. It is highly unlikely that companies will fully pass on the entire 20.5 per cent dividend distribution tax not payable by them now to the shareholders as dividend and increase the dividend payout commensurately. With the inclusion of the dividend income, the total taxable income of many taxpayers will get pushed to higher slabs. It will disincentivise equity investment.
A K Gupta, Ludhiana
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