This is against the principle of equality and natural justice. If introduced, it will tantamount to double tax. We see no logic behind this proposal since the dividend is already taxed in the hands of the dividend distributor. The stock market will suffer a lot,” said RN Lakhotia, a direct tax expert.
“Taxing at the hands of individuals is against the concept of dividend distribution tax. DDT was introduced to avoid hassles of collections from individuals,” said PricewaterhouseCoopers executive director Rahul Garg.
While the proposal raises concerns of double taxation, taxing dividend above a high threshold would mean it is in line with the idea of progressive taxation. Of 32.4 million taxpayers in the country, some 400,000 reporting taxable income higher than R20 lakh paid over R93,000 crore as income tax in 2011-12. In other words, 1.3% of the taxpayer pool accounted for 63% of the total personal income tax collection of R1.5 lakh crore in the year. Currently, the highest income tax rate of 30% is applied on taxable income of R10 lakh-plus, while the top income tax rate is higher in countries like Australia, Sweden, the UK, Switzerland, Germany and Denmark.