Tuesday, February 16, 2010

Pramod Shrikanth D, Bangalore

Currently the Income Tax provisions mandate the corporate assessees to pay the dividend distribution tax at 15% on the amount declared or distributed to shareholders in the form of dividend. In the practical scenario, the companies pay income tax at 30% on their regular taxable income which also includes the amount so distributed to shareholders. Due to this particular tax clause in the statute book, mere distribution of profit necessitates the companies to pay a huge tax to the Government which has created a wrong precedence in tax collection mechanism. Apart from this, the assessee companies can’t claim the amount so paid in the form of tax as deduction while computing the regular taxable amount. The Government’s rationale behind taxing the dividend distribution is not correct even though the shareholders are exempt from paying the tax on the amount so earned by them since the company pays the tax on the entire income earned by it. The Finance Minister has to take the vigilant steps for rationalising these types of special provisions which tantamount with the normal charging section specified in the tax law. Because of this, a large number of corporate assessees are badly affected on their cash flow part apart from leading for a situation of double taxation.

Pramod Shrikanth D
Bangalore-based Chartered Accountant
D# 368, Daithota House, II Floor, 7th Cross,
Akashavani Layout,
Dasarahalli,
Hebbala
Bangalore - 560024
+ 91-9900975290
dipishree@gmail.com

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