Double Tax On Payouts May Go, 80l Limit To Rise

A review of the minimum alternate tax on zero tax companies is also on the cards. Though MAT will not be withdrawn, the possibility of either a lower MAT rate or an exemption to certain categories of companies, like exporters, cannot be ruled out, government sources said.

These measures, if cleared, are expected to considerably lift capital market sentiments. The capital market has been in a bear grip for nearly one and a half years, and has failed to respond to several measures taken by the government, including steps announced in P Chidambaram's budget.

This has got the government worried, prompting Chidambaram to recently announce in Parliament that he intends coming out with a package to improve investor confidence in the capital market.

 

The new measures are likely to include relaxation in tax ceilings under 80L of the Income-tax Act and removal of double taxation on dividend earnings. Both these proposals were considered while drafting the budget but were not included in it.

Under Section 80L, the present exemption limit on dividend earnings is Rs 13,000. This ceiling is likely to be raised to Rs 20,000 on certain specified investments.

The demand for removing double taxation on dividend earnings is an old one. Dividend income is taxed twice, first as a tax on profits earned by companies and then in the hands of the shareholder. The proposal for stock lending has been on the cards for long but not cleared on account of legal implications.