Dividend distribution tax

Plz Clarify

dear sampathkumar,

sorry to say ddt/cdt is not tax on profit rather its tax on dividend.... the above example u gave is a blunder as you have charged ddt/cdt on pat. ddt ic charged only when cmpany pays dividend. please go through the sec 115-0 of income tax act.

cheers

ganesh agarwala

Dear Ganesh Agarwal,

You are right. Dividend Distribution Tax ( DDT) is payable only if and when dividend is declared/paid and it is not a tax on profits.

However, I guess what Mr.Sampath Kumar was trying to highlight was that same income  is being taxed twice.Although in a way true, here, one may note that Supreme Court had long long ago upheld the taxing of Dividend. Here the contention was, Company pays taxes on its profits and Shareholders pays tax on dividend he earns on his investment in Shares and that Company is a separate legal person different from the Shareholder in in the eyes of law. This is the justification given by the Dept.,

DDT is tax on dividends. The tax is actually the tax on income of the investors in the form of dividend. But it is very difficult to collect tax from every investor because their may be large no of small investors. So govt charges DDT from company on the amound of dividends distributed by them.

Very much Thanks Frns, for Clarifying the doubt......