Budget 2018 shocker for M&As: Entities to pay 20% DDT with retro effect?

FM Arun Jaitley's Union Budget 2018-19 has plugged tax loopholes on India Inc mergers

The Budget has proposed to tax all mergers and amalgamations in which a company with higher accumulated profits merged with a company with lower profits or made losses and reduced capital to avoid paying dividend distribution tax. This step was necessitated as companies – mainly multinationals - announced mergers in the last few years to escape liability of paying tax on distributed profits in India.

This step will impact all mergers that were announced in the last few years and reduction of capital took place in the last one year, tax experts said.