InvestorQ : I read an interview by a promoter that the dividend tax will be 57% on the promoter. How it possible when the peak rate of tax is 42.7%?
NISHA Nayak made post

I read an interview by a promoter that the dividend tax will be 57% on the promoter. How it possible when the peak rate of tax is 42.7%?

Answer
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7 months ago


I think the promoter was referring to the abolition of dividend distribution tax (DDT) and the introduction of the withholding tax on dividends. The way they are calculating is that dividends are paid after tax so there is no tax shield available on dividends. If you consider that then the total cost of the tax shield lost and the tax paid at the peak rate would be close to 57%. This sharply higher than the 47% which promoters paid last year and that is what a lot of promoters have been complaining about. The DDT was imposed at 17% (including surcharge and cess) and even if you added the 10% tax in the hands of the promoters, the total cost was lower last year. That has been the complaint of many promoters and HNI investors. It also puts them at a disadvantage vis-à-vis the MNCs.