The Ministry of Finance may consider taxing dividend in the hands of shareholders and do away with the dividend distribution tax (DDT) in the Budget to be unveiled on February 1, EY India said on Monday.
In its pre-Budget expectations, EY said that DDT has become burdensome for corporates due to various factors such as high rate, litigation on disallowance and hence the return on capital employed has significantly diminished.
In the Budget 2015-16, Finance Minister Arun Jaitley had said that the basic rate of corporate tax in India at 30% is higher than the rates prevalent in other major Asian economies, making domestic industry uncompetitive, and it would be brought down to 25% over four years.
"Corporate income tax rate reduction does not seem likely in light of the fiscal constraints and subdued Goods and Services Tax (GST) collection. However, Government may rationalise the effective corporate tax rate by abolishing Dividend Distribution Tax and restoring the classical system of taxation of dividends in the hands of shareholders," Pande said.
Deccan Herald is on WhatsApp Channels| Join now for Breaking News & Editor's Picks