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Finance ministry makes a budget case for small investors

CIO Insider Team

Nirmala Sitharama, the Finance Minister said Indian companies on Friday that expected developments in dividend distribution tax policies were anticipated at bringing enough fund in the hands of small shareholders, acknowledging, “let them decide what they want to do with it".

On the personal income tax front, the government believes that 69 percent of taxpayers are expected to receive an advantage from the refined tax regime, at the same time for 11 percent it would remain tax-neutral. On February 1, the declaration of the budget by the Finance Minister, with

deference to a long held company appeal recommended that as a substitute to companies paying dividend distribution tax, now it will be taxed at the hands of investors at a minimal rate.

Finance Minister Nirmala Sitharaman said: “If you look at taxation now for taxpayers whose applicable rate is below 15% or 20%, the abolition of DDT is conducive. For promoters and HNIs, it wasn’t suitable earlier and it is worse now. But you are thinking of one section, while we want to put money in the hands of the other section. We want to give money in the hands of the small retail shareholders—let them decide what they want to do with it."

“A very small proportion of taxpayers will have such high dividend income to push them to the highest tax bracket. For small shareholders this is a better regime as they will continue to be taxed at marginal tax rates. We already are seeing many companies moving to pay out dividends, but I do not believe this will sustain as many companies’ highest revenue are in the last quarter, so a dividend payout is unlikely," said Deepak Shenoy, founder and chief executive officer, Capital Mind, an investment research and wealth management firm.

“Our discussions show that this is the old-fashioned way of directing investments (through tax breaks), and is limiting options to the taxpayer. If he wants to spend his money in this economy, it is welcome. If he wants to save where he wants to, that’s welcome. We wanted to address this, and this is where we went."

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