Govt may look to correct dividend anomaly for FPIs in upcoming Budget

Last year's Budget had created uncertainty about the quantum of tax to be withheld on dividends paid to non-residents, as the exact tax rate was not specified under section 195

Foreign portfolio investors (FPIs) have reached out to the government to reexamine laws that deal with withholding tax on dividends in light of uncertainty over the quantum to be levied on such investors, and market obse­rvers believe the government might correct this in the upcoming Union Budget.

Last year’s Union Budget had created uncertainty regarding the quantum of tax to be withheld on dividends paid to non-residents. 

This was because the exact tax rate was not specified under section 195, which covers tax deducted at source (TDS) or withholding tax for non-residents.

The Finance Act, 2020, had clarified that a