After protests from middle class against the EPF provisions, the super-rich too have raised demands that the NDA Government reconsider its Budget proposal regarding the taxation of incomes from corporate dividends in excess of Rs.10 lakh.
At a meeting of former presidents of the Confederation of Indian Industry (CII) with Economic Affairs Secretary Shaktikanta Das, demands were raised that the proposal be withdrawn or amended as it amounts to triple taxation with first corporate profits getting taxed, then the tax on dividend distribution and now the proposed additional 10 per cent tax in the hands of high dividend earners.
Former CII President Rajive Kaul and Salil Singhal of PI Industries both said that the proposal “amounts to triple taxation.” Former CII President Sunil Munjal suggested that the proposed tax be deducted at source. “It will lower the administrative costs,” Mr. Munjal told The Hindu.
The CII will collate the various requests for reconsideration and comments on various budget proposals made at Wednesday’s meeting to be submitted to the Finance Ministry.
Former CII President Rahul Bajaj, who was also present at the meeting, told The Hindu that he was not in agreement with the demands made: “I think the Finance Minister is doing the right thing by introducing progressive taxation of dividend incomes”.
Under the existing rules, dividends are taxed at the rate of 15 per cent at the time of distribution in the hands of the company declaring dividends. As a result, tax payers even with high dividend income and who fall in higher income tax brackets are subjected to dividend tax only at the rate of 15 per cent.
It is with the view to eliminate this vertical inequity across dividend income earners that the budget has proposed an additional 10 per cent tax on income in excess of Rs.10 lakh from dividends on corporate profits (calculated after paying corporate tax). Individuals, Hindu Undivided Families and firms that are resident in India will have to pay the additional tax that is proposed to take effect from April 1, 2017, according to the budget documents.
If dividend payments similar to the previous two years are distributed at the Reliance Industries, its Chairman and Managing Director Mukesh Ambani could have to cough up more than Rs.100 crore by way of the additional tax, according to reports. Wipro Chairman Azim Premji could also be among the promoters taking big hits on dividend earnings.