Although the introduction of a new dividend distribution tax for bigger stakeholders in the FY17 Budget has dampened the sentiment of investors, an FE analysis shows that the move may not be able to fetch much tax receipts in the government’s coffers.
The analysis shows that under this new additional DDT rule, the government could have collected close to Rs 160 crore of tax revenue based on FY15 numbers.
For the exercise, we short-listed companies that dolled out dividend of more than Rs 500 crore during FY15, and then filtered receiving investors based on their share holding. We assumed that all the 143 individual investors that held more than 1% stake in these companies and received more than R10 lakh as dividend were of non resident status in order to get the maximum receipt numbers.
In his Budget speech on Monday, finance minister Arun Jaitley said that dividend income of more than R10 lakh will be taxed in the hands of investors which are resident individuals, hindu undivided family (HUF) or firms.
According to tax experts, this measure will have a direct impact on individuals who are resident Indians that own substantial stakes in Indian companies.
On the other hand, stakeholders, including holding companies, insurance companies and mutual funds will not
fall under the ambit of this rule.