Sir,
Sub: Union Budget 2009 – Tax on dividend distributed by companies –
Inclusion of dividend as income and deduction of tax in the hands of
shareholders
The Finance Minister has not touched the 'income from Dividend', where there is scope augmenting income as well as for bringing in 'equity in taxation'. As the law stands today the
shareholder who is getting dividend of Rs. 1 Crore and his counterpart who is
getting Rs. 10,000/- are treated alike i.e. the dividend is subjected to tax in
company's hand (in the form of dividend distribution tax) at the same
percentage and the dividend income is exempt in their hands. Instead if the
dividend income is added with other incomes and the tax suffered i.e. the tax
paid on the dividend distributed is allowed as rebate/deduction form the tax
payable, it will have equity in the sense that who earns more will pay more and
who has no other income will pay less tax or even can get refund if his/her
income is less than the maximum non-taxable taxable limit. One of the 'canons
of taxation' is equity and on that principle the tax payable will be more for
who earns more and will be less for those who earns less because those who are
in higher bracket will have to pay additional tax than the dividend
distribution tax of 15% (plus surcharge of 10% and education cess of 2% and
secondary and higher education cess of 1%) whereas who earns less will pay less
@10%(plus usual cesses) and those whose income is less than the maximum
non-taxable limit will get refund. Will the Finance Minister will look into the
matter and see that the act is amended accordingly to help those who are in the
lower income bracket.
Yours faithfully,
L. Madhav Muthiah, B.Com.
Manager, Sree Valampuri Agencies,
153G, North Veli Street,
Madurai 625001.
Mobile: 9894718741
